The S&P 500 faces volatility as a rising wedge pattern emerges ahead of quarterly options expiration. While moderating oil prices offer relief, a hawkish Fed (DIA) and rising Middle East tensions necessitate a tactical approach for investors.
I think stock markets 'read this' as a more hawkish FOMC; because of the unanimous vote to hike and indication of 1 or more ahead (perhaps not before mid-terms?). Note it was in Dow (DIA)-type stocks typically more widely held, and also tied to consumers who are more sensitive to interest rates, than (for instance) big tech or 'new-era' defense plays. I believed (the market concurs) that it doesn't like this attitude by the Fed; and you saw that tone displayed. I call attention to the upcoming Quarterly Expiration and a rebound after that and Yom Kippur.. hence the smarter play here (as I suggested on 'X' near the afternoon low) may have been a trading buy of favored tickers). A huge 'Wild Card' though 'is' the war; especially if it expands and now Egypt enters on Saudi's side (this is becoming more of a Sunni/Shia battle than involving Israel; please explain the sects or Muslim cults who hate each other more than their conflict with Jews.... I thought our Government learned that during the 1990's, but maybe not. George Bush Senior sure knew it (he was formerly CIA Director).. and is part of why he didn't send Schwartzkopf to Baghdad in the first war... just because Saddam..feared as he was.. was Iraq's glue controlling those opposing sects. It is argued we should have stayed out of the whole Muslim 'sect' disputes, but the US moved regional operations to Kuwait & Bahrain after that first Gulf War (incl. 5th Fleet HQ); and recently hit so heavily by Iran. I have noted this before as specifically why logistics and resupply of our Fleet has been so difficult.
Bottom-line: a Fed Chairman again reiterated he's 'hard-pressed' to describe monetary conditions as 'restrictive' and they removed accommodation to align with their goals of 2% rates (really a party-line kind of response). I'd concur in terms of conditions not really restrictive (on an historically relative basis); but of course a generation got accustomed to low interest rates with less volatility.
The market was 'hard-pressed' to hold onto the relief rebound and faltered..it was not unlike 'the old days' of a reaction; counter-move; then shuffle mostly in the direction the Fed move would typically anticipate to start with'.... hence a whipsaw intraday but it's not at this point more than that. Actually so far was constructive from the standpoint of traders or investors who wanted a dip to buy. Well they got one; now we'll see the shuffles through Expiration (tricky).
However suspect big-cap Option Writers were briefly 'thrilled' by Wednesday's late selling (might even have been the buyers to hedge their exposure these next two days); since these sessions wrap-up Quarterly Expiration; given an initial hit took a majority of trading vehicles (which is what active stocks are for them) below a few key strike levels.
Again this is going into the Triple Witching Quarterly Expiration.. so it may well set-the-stage for an ensuing washout and rebound, which seasonally by the way still follows the old 'sell Rosh Hashanah then buy Yom Kippur' adage.
By the way... AI 'complementing' my 'bet' on drone and related tactics, does not mean it all works.. hopefully some or most will. AI seemingly most always tries to flatter users; without ensuring whether the outcome will be rewarding.
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I appreciate investors increasingly following me @stockseer on 'X' (Twitter) for morning comments. (Tweet) 'X'-rays are market quick takes. And while all 'X' content remains complimentary, new ideas usually appear here initially.
Stay safe,
Gene
Gene Inger
Disclosure:
This is an excerpt from Gene's Daily Briefing (distributed nightly), which typically includes videos as well as more charts and analysis.
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