1) Stocks Grind After the Fed
Yesterday, we saw a pretty solid equity market rally after the Fed raised rates, but stocks went right back to sleep today.
The S&P 500 fell -0.2% to 2381.38, and the Dow and Nasdaq barely moved as well.
The action under the surface was pretty mixed.
The Russell 2000 outperformed by a tiny bit.
Regional banks made up some of the ground they lost yesterday. And some high-beta tech stocks, including Tesla (TSLA) and nVidia (NVDA), staged decent rallies.
But on the negative side, biotech saw profit-taking, with the IBB ETF falling -1.3%
2) Options Traders Running Wild
Last week, sentiment became neutral after 2 weeks of pretty serious bullishness.
Sentiment continued to deteriorate this week.
However, I noticed one interesting thing this morning: the ISE Sentiment Index showed that traders were buying call options in massive quantities.
This implies that many traders believe the post-Fed rally from yesterday was destined to continue.
Only time will tell if this morning’s extreme positivity marked a short-term top.
3) 2370 Is the Line in the Sand
With the market in digestion mode, traders are asking what’s next?
We’ve come a long, long way since the US Presidential election, and volatility is nowhere to be found, despite a crazy international political news flow.
This morning, my buddy Jeff Cooper laid out the argument that SPX 2370 is the line in the sand you should be watching.