Daily Plan 5/3/2023
What will S&P500 do after the FOMC?
Hey guys -
Good overall day for the order flow levels, starting from the weekly levels, the breakouts on both ES and NQ miserably floundered
NQ is down another 100 points, now down about 250 points from the weekly resistance level and the ES is down about 100 handles from the weekly resistance levels, having traded both the upper and lower weekly levels today.
I have been an S&P500 Emini bear since 4200 and each and every attempt to take it out has failed, multiple attempts have failed in over the last 25 sessions!
The beauty of a level like this is if this were to ever give up, it could become a good support. But I think very unlikely.
This is the tightest range I have seen over such a long period of time over years! Barely a 100-point range in like 25 sessions! Extremely unusual.
With the FOMC tomorrow, keep in mind a couple of things -
The market has been rangebound for over a month now. And we are in the middle of this range at the moment.
For the past few FOMCs, the real moves have come a day or two after the FOMC, not the same day.
Seasonally, April was supposed to be a great month, with an average of about 2%. S&P500 has barely budged for the last month. It is nearly unchanged.
Here are the last 5 FOMC meetings and the S&P500 behavior in the weeks following after those-
September - Unchanged on the day of the meeting and down about 10% following the meeting after a few weeks.
November - Sell off about 6% after the meeting.
December - big rally on the day of the FOMC, loses about 8% a few weeks after the meeting.
January - Big rally on the day of the FOMC, and lose it all and then some more in weeks to follow. Down about 8%.
March- sell-off on the day of the FOMC but then has been up about 4% ever since.
In fact, March FOMC is the only FOMC in over last 6 months when the S&P500 did not sell off in a sustained manner during the weeks following the FOMC. The reason for this optimism was the SIVB failure just a week before the FOMC when Powell was under pressure to assuage the investors’ feelings.
In fact, if one did nothing during the FOMC and waited for the market to take out the FOMC high or low the next day or so, this could have been a great strategy.
Though I normally do not like to do a super formal plan for the FOMC days, along with CPI and NFP, I do have some levels to share.
Generally, I think the bears have an edge as long as we remain below 4140-4150.
Above 4140/4150, 4200 could be the resistance but I do not like to see a test of 4210-4215 after the FOMC.
I think if we remain below 4150 and begin taking 4090 out, this could lead to a test of the 4050 area.
Some other considerations -
These mega caps have beaten their revenue and earnings estimates yet this has not quite translated to big gains for the index.
One reason for this may be that the related markets are flashing recession signals.
The markets do not thrive in uncertainty. Right now the consensus is that the FED is done raising rates and will cut rates later in the year.
I will be all ears for any kind of signal from this FED tomorrow that the rate hikes are done and they will start cutting soon.
Conversely, any hint from this FED that they may have more rate hikes ahead and/or a strong denial of any rate cuts this year could be bearish.
Have a great day!
~ Tic
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