USD

FED On Deck, Slow Open For U.S. Equities

Posted Tuesday, June 12, 2018 by
Shain Vernier

It has been another flat open on Wall Street, with investors still digesting the super-charged news cycle. The indices are mixed, with the DOW off moderately and the S&P 500 barely in the green. U.S./North Korea relations are still making headlines as is tomorrow’s meeting of the U.S. FED.

What Are The Odds Of A Wednesday FED Rate Hike?

New FED Chair Jerome Powell is due to take the stage in a bit over 24 hours. A 25 bps rate hike is a being labeled a foregone conclusion. Currently, the CME FedWatch Index is assigning a 91.3% of a rate hike for the Wednesday session.

However, a fascinating phenomenon is taking hold in the markets. Earlier this spring, investors expected three or even four rate hikes for 2018. This sentiment is shifting. Odds of a third 25 bps rate hike for September have dropped about 5% to 68% month-over-month. The chance of an all-important fourth rate hike for December has held steady at 41%.

The markets will be paying close attention to the dialogue coming out of the FED meeting. Thus far, the phrase “gradual tightening” has been the standard. Will the term “aggressive” become the new norm? In a little over 24 hours, we are certainly going to find out.

DOW Technicals

The early week trade on the U.S. equities exchanges has been slow. September E-mini DOW futures have mirrored the action. At press time, we are seeing compression just above the 25,300 level.

September E-mini DOW Futures (YM), Daily Chart
September E-mini DOW Futures (YM), Daily Chart

September E-mini DOW futures are on a formidable winning streak. The last seven sessions have traded and closed in the green. Although today’s open has been slow, the technical outlook is still very positive.

Here are the levels to watch for the remainder of the session:

  • Resistance(1), Swing High, 25418
  • Support(1): Psyche Level, 25000
  • Support(2): 38% Retracement, 24977

Bottom Line: As long as the current Swing high of 25418 holds, then a buy from the 38% retracement of the current bull run is a positive play. Buy orders from 25010 produce a good trade location to the long. Using an initial stop at 24949 and a 1:1 risk vs reward scenario, this trade yields 61 ticks on a bounce north from the 25000 area.

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About the author

Shain Vernier is our US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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