Market Loves/Hates Fed Days

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Last night we wondered if the market correction was over?

After all, both SPY and QQQs traded into resistance.

In SPY that number is 342. In the QQQs it’s 282.

The DIA had to hold 28,000.

SPY tried to clear 342 but wound up closing red and under 340.

QQQs tried to take out 282, and as first to go red, it closed down over 1%.

The Dow did indeed hold 28,000.

The FED came out dovish, with no change to rates and the comment that rates will stay near zero until 2023.

But they were once again vague on how to get inflation going.

Furthermore, the minutes yielded nothing unexpected.

So, did that put the kibosh on the rally?

I include a chart of the volatility index.

As the market did exactly as one would expect, with the run but failure to hold above the resistance levels in SPY and QQQ, it’s that time again.

Or, we can call it, the continuation of the love/hate relationship the market has with the FED.

First off, junk bonds and high-grade investment bonds, the Fed’s playground, are still doing well. So that tempers real bearishness.

However, on August 26th, VXX made a low at 23.64 and then put in a reversal bottom.

Currently, VXX closed down about ½% on an options expiration day, so the better assessment will be tomorrow and Friday.

If SPY and QQQs cannot recover today’s early bounce or if the Dow gives up 28,000, watching VXX is a good way to hedge or at least assess your portfolio.

I still believe that as we get closer to the end of this month, another correction is coming. But of course, we need more evidence (like in JNK and LQD).

VXX over 25.03 is a possible entry with risk under the August 26th low.

S&P 500 (SPY) 338 must hold support. 340 pivotal 342 resistance

Russell 2000 (IWM) 153 153 support 155-156 resistance

Dow (DIA) 280 pivotal support 285 resistance

Nasdaq (QQQ) Right on the 50-DMA-could get ugly if breaks again-270 support

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