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