FOMC Minutes Could Spark A Small Round Of Profit Taking Today
Yesterday the market closed just below the all-time high. The losses from last Wednesday have been recovered and buyers are still engaged. Oil has stabilized and financials participated in the rally Tuesday. This is a bullish sign, but the move could have been a one-day event.
The FOMC minutes will be released this afternoon and I believe Fed rhetoric will have a hawkish tone.
We are currently in a news vacuum and trading volumes are low ahead of the holiday.
There is an 80% probability that the Fed will hike in June. The FOMC minutes could spark a round of profit-taking. I’m not looking for a big decline, just a little selling that might challenge support at SPY $239. The market will tread water the rest of the week.
As the June FOMC meeting approaches the selling pressure will build. If the Fed hikes in June the market will test the 100-day MA. Current economic conditions don’t justify another rate increase and tax cuts won’t be approved anytime soon.
Swing traders should have entered bullish put spreads over the last week and those positions should be in nice shape. Place your stops and let time decay work its magic. I suggest buying them back if the SPY closes below $238. We need a nice pullback in June before we can consider buying calls.
Day traders should trim their size and trade count. Focus on one or two good trades and call it a day. Daily ranges are extremely compressed and stocks have little follow-through. Set passive targets and use the first hour range as your guide.
If by chance the FOMC minutes are deemed to be dovish (unlikely) the market will breakout to a new all-time high. I will day trade the move, but I will not carry overnight positions. The rally has been narrowly confined to tech stocks and I won’t trust the breakout until financials participate.
Trading is going to be very dull so keep your size small.
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