5/5/22 The Market Loves Powell

News:

Yesterday the Fed announced a 0.5% increase in short-term interest rates. The decision was unanimous. It is the biggest single rate hike since 2000. Inflation, I need not remind you, it at a 40-year high.

The Fed also plans to begin reducing its $9 trillion balance sheet at a rate of about $48 billion per month.

But the real reason the markets rallied ~3% after the press conference … Fed Chair Powell said the Fed is not considering a 0.75% increase in June.

In other news, The Wall Street Journal is reporting that Americans are back to their old habits.

From concerts to sporting events, and shopping to travel … Pandemic habits are dying as Americans get back out and spend money like it’s 2019.

Technicals:

The put-to-call ratio is still oversold. That’s day 10 now…

Investors don’t believe the rally will last.

With RSI levels neutral I’m once again looking at VIX for guidance…

VIX Daily Candles – Chart via thinkorswim

The recent spike ended with a lower high. But you can see the rising support at the bottom…

A serious breakdown below the rising support would lead me to believe the bulls are back in charge.

This morning futures are trading in the red. I would like to see a red open and green close to confirm a bullish trend.

Timing:

It can take up to 5 trading days for the FOMC meeting to be fully priced in.

I’m also watching the latest unemployment filings numbers that are due out this morning. And the unemployment report that will be released tomorrow morning.

It’s still summertime trading for me…

I’m generally risk off and trading small positions only at the moment.

Watchlist:

*Low Float
^Open Position

^*RCMT is on watch
TMDX is on watch
CVI has support at $29
^NKTX has resistance at $20
SGML has support at $16
SMCI is on watch
TWI has support at $15.50
DK is on watch
^REI has resistance at $5
BORR is on watch
ARLP has support at $18.50
TTI has support at $4.40
^CXW has support at $13
CC is on watch
^DVN has support at $65
SU is on watch
EDU has support at $12

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