Well… that was something else. To nobody’s surprise, the fed hiked by 75 bps today. What got the market all hot and bothered at the strike of 2p was a line from the printed statement that contained the phrase “cumulative tightening.” The market interpreted that as an indication that the pace of hiking will begin to slow down as the central bank allows the impact from the previous hikes to begin playing out in more of the data sets; which are generally lagging indicators. The S&P 500 ripped, metals ripped, crypto ripped.
Then Powell actually started talking and threw bucket after bucket of water on the bulls. The result was not pretty. The dollar index, which had traded down to 110 immediately following the release aggressively reversed and is now ahead of both the 50 day MA and 111.3 resistance:
While that was an incredibly impressive reversal in the dollar, there is still more resistance ahead to consider before we start throwing in the towel on some stonk longs. This is what I said for paid subs before the market opened this morning:
I am of the opinion that the dollar is going lower after the dust settles from FOMC. If there isn’t a hawkish surprise of some sort, I think the “pain trade” is going to be to the upside over the next couple weeks. Of course, I could be very wrong. I have been before. I will be again. But I’m going into FOMC with some risk on and some cash ready to buy some things I want.
While you could argue Powell was hawkish in his comments following the hike announcement, “cumulative tightening” was in there for a reason. The dust is now beginning to settle. There may be more pain tomorrow. But I’m watching a very specific level in the S&P 500 before I get too concerned. Here’s exactly what I did this afternoon:
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