By: Jeff Cooper
Hit and Run Morning Stock Report: 09/20/2022
Need help? Check out the Hit and Run Success Guide.
Can the Market Have the Fed’s Cake and Eat It Too?
The futes were down as much as 50 points Sunday night but trimmed that prior to yesterday’s open with the cash striking a low for the day in the first half hour.
Many stocks such as ROKU, ZS, ENVX, and CYBR scored early lows and grinded somewhat higher before taking off in concert with the SPX- making a break for the 3900 level of lore (the trendline du year from the summer lows).
It looked like the market was in waiting mode for the Fed on Wednesday but the pattern suggested a push to 3900 which we tweeted.
The SPX closed at 3899.89.
You can’t make this stuff up.
The Street is all twitter-patted about the Fed’s meeting on Wednesday. But in reality, there’s no secret to be had.
The Fed is going to raise rates: Fed Funds are currently at 2.50% and the U.S. 3-month T-bill is yielding 3.12% and the U.S. 6-month T-bill is yielding 3.86%. so the Fed is behind the curve with market rates.
Some expect a face-ripper of a rally because the “news” is baked into the cake.
But the Fed is no friend of the market as it has been for 13 years.
They are happy to see the market down…they just don’t want a smash.
But, they likely cannot have their cake and eat it too.
IF the SPX clears and sustains above 3900 it could squeeze higher but it looks like we’re in the C wave of an A up B down C up corrective rally.
As well we stated in Monday’s report if the market rallies into the Fall Equinox, it could prove to be the real pivot (high)-- not the Fed Pivot that bulls are hoping for.
The point is the August 16th high was the start of wave 3 down and a Selling Climax is likely before the fall is over.
This phase of the bear market is unlikely to be over as we have not had a spike in VIX which always accompanies major lows.
In sum VIX and VXX were down even when the market was down and given the intraday pattern in the SPX suggested a rally and we got it.
BUT…the TREND for VIX and VIX ETF’s is UP.
We will remain patient.
Fast moves come from false moves and if a fast move to the downside is on deck, then a false move to the upside may be the precursor.
It is remarkable that Fed Day ties to the Fall Equinox, Gann Day.
If we get genuine momentum over 3900 a squeeze play to the declining 20-day ma near 4000 could theoretically play out.
Interestingly this ties closely to where the 50-day line resides as well.
And what do we know that one of the most important levels of the year is 4020ish.
This is two cubes of 540 degrees or 1080 degrees down from the 4818 ATH.
It would be an interesting spot for an FOMC Cha Cha failure to start slide.