Fed Fund Futures are pricing in a 25 basis point rate cut (95%).

PRE-OPEN MARKET COMMENTS FED-DAY – We don’t have any market momentum heading into the FOMC Statement. The market has been trapped in a tight range the last two weeks and the volume has been light.

Asset Managers are not excited near an all-time high. Will a 25 basis point rate cut get them excited? No. They are expecting that. Should we expect dovish Fed speak during the press conference? Yes, but there won’t be a change from what they’ve said in the past. They have the latitude to ease if they need to. Economic conditions are stable (although softening) and inflation is near the target (but there are signs that it is ticking higher). I feel that these conditions will offset and this could be a “nothing burger”.

Trump is going to take office in a month and he will execute aggressive policy changes. I believe the Fed will observe the impact. This is a time of uncertainty and they don’t need to paint themselves into a corner. They have flexibility and they will preserve that with a boring “wait and see” statement.

The Fed is on the path of easing and interest rates have been grinding higher. That is a disconnect. It doesn’t make sense and when I see that, it tells me to keep my powder dry.

I envisioned a scenario where programs fuel a nice rally into triple witching. In order for that to play out, we needed to see a dip the last two days down to $600. That would have attracted bearish speculators who would be vulnerable to a big rally. The drop would have also attracted Asset Managers willing to buy a small dip. We didn’t get the drop we needed for a good entry point so I’m not going to trade that set-up. The drop would have also given the programs the fuel needed to break through the all-time high. Without that, it is less likely to produce a nice sustained move.

It’s not that this still can’t happen, the odds of it are lower and not worth the risk.

If you look at RSP, it is an equally weighted index for the SPY. It has been in a steady decline from the high. That tells us that mega cap tech is driving all of the action. We can also see that QQQ has relative strength. Those are the stocks you want to trade if the market moves higher. IWM and DIA have also been drifting lower. I don’t like this backdrop longer-term. This move higher feels contrived and vulnerable. The volume is light so the action is 90% program driven. Know that you are trading against algorithms. That makes it very difficult to predict price movement.

Look for stocks with super tight orderly upward price action for your day trades. The first half of the day will be very dull. I am on the sidelines from a swing trading standpoint.

Support is at SPY $602 and resistance is at the all-time high.