From the Trading Desk

FOMC Meeting Begins; Stocks take a Step Back

Ahead of tomorrow’s FOMC meeting stocks were mostly quiet. Most, if not every trader believes the FOMC will raise their benchmark rate by another 25 basis points. The market seems quite content with the move as evidence by the lack of volatility and extreme fear. At one point in time any hint at a rate hike would send this market in a tailspin. For now, it seems clear the market is quite okay with the FOMC hiking rates another 25 basis points. A good sign for today’s action was many of our longs held up relatively well. In addition, after a bit of morning selling buyers rushed in and supported the market. All we can do now is continue what we have been doing. Until this market shows us otherwise we are going to have our stops in place to protect our downside and see what this market has in store for us.

The FOMC continues to be a large part of this market and after providing a tremendous amount of liquidity they are slowly weening the market off low rates. Financials have been a big benefactor of higher rates. It is easy to see why higher rates help banks. What is interesting to see is the support utilities have had over the last few weeks. In fact, the XLU just saw its 50-day cross over its 200-day moving average! The golden cross. Can XLF and XLU continue to run higher together?

Not much to do here, but wait on the Fed to announce the rate hike and see where this market takes us. There is nothing fancy about this market. While we’d love to see, this rally continues we still have not seen a proper correction in some time. We’d welcome a nice quick bear market correction. Not just 10%, but something more substantial to really usher in brand new winners. We are just not talking about 20% gains. To see the charts, we had throughout the early to mid-2000s would be great. Unfortunately, we can only trade the market we have in front of us and not the one we want. You just have to keep grinding through.

Enjoy the rate announcement tomorrow! Get your popcorn ready.

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