Good morning!
Big day for the market. Premarket is green ahead of today’s key Fed decision. This time, the market appears to be looking for a rate hike, and if we get one with the right guidance, we could see a strong upside reaction.
That said, the speech and guidance will matter just as much as the decision. The market can react very differently at 2 PM and again around 3 PM, so I’ll personally wait until roughly 3–3:30 PM for a clearer directional move.
My plan: if we get a strong upside move, I’ll look to take profits on swing positions where I have a good gain rather than chase.
For $SPY, a $752 put expiring Friday can be considered as a hedge, while the $770 call expiring Friday offers a higher-risk upside setup. Manage risk carefully with short-dated options.
AI stocks could have a big day if the Fed delivers what the market wants, and some small caps that showed strength yesterday could continue that momentum.
I’m not buying anything in the morning unless I see a very clear breakout with confirmation.
I’ll keep updating throughout the day. Stay patient and protect capital.
Overall market expectations for FOMC
FOMC day = volatility.
Five scenarios on the table, with the market reaction depending heavily on the Fed’s guidance:
- No hike: S&P -1.25% to -1.75%
- 25bp hike, no guidance: +0.25% to +0.75%
- 25bp hike + more aggressive path: +0.50% to +1%
- 25bp hike + higher R-star: -0.25% to -1%
- 25bp hike + “materially higher” rates: -1% to -2%
The rate decision matters, but the guidance could matter even more. Buckle up.