As usual when the Fed reveals its intentions for the next few weeks, at the conclusion of their current FOMC meeting, the algos will react to the headlines. But, of course, the real action will begin when Mr. Powell has his post meeting press conference, where he will say things that are almost certain to trigger reactionary moves from the headline reading robots.
What's really important, though, is that the market is currently testing key support levels (Nasdaq 100) and resistance levels (10 Year note and 30 Year T-Bond). Thus, if the Fed's decision and Mr. Powell trigger enough of an algo reaction, the subsequent move could be one that changes the market's trend for the intermediate term.
What that means is that stocks could enter a meaningful downtrend and that the rise in bond yields will could be accelerated. At the same time, if the algos like what Mr. Powell says, the stock market rally could resume and the climb in bond yields could reverse.
That said, the most important aspect of the post-Fed meeting trade will be the action in the bond market. Here are the key yield points and stock index support levels to watch:
- U.S. Ten Year Note (TNX) – 1.7-2% Yield
- U.S. Thirty Year Bond (TYX) – 2.5-2.7%.
- S&P 500 (SPX) – 3850
- Nasdaq 100 (NDX) - 12500
Also consider the following:
- NDX is already trading below its 50-day moving average, which means that tech stocks are the weakest area of the market at the moment.
- If yields break above those key chart areas, robot trading algorithms will be triggered and, whatever the trend at the moment is, it will likely be accelerated in both stocks and bonds.
In other words, today is a day to be very vigilant of both the market and our sell stops.
For more on how these important factors can affect your portfolio, catch me live tomorrow afternoon at the Money Show Virtual Event. Click here to register. More as needed.
For more on how to deal with the current market, check out my latest Your Daily Five video here. For more details on bonds, currencies, and stocks, check out my recent interview with WallStreetReporter.com here.
Joe Duarte
In The Money Options
Joe Duarte is a former money manager, an active trader and a widely recognized independent stock market analyst since 1987. He is author of eight investment books, including the best selling Trading Options for Dummies, rated a TOP Options Book for 2018 by Benzinga.com and now in its third edition, plus The Everything Investing in Your 20s and 30s Book and six other trading books.
The Everything Investing in Your 20s and 30s Book is available at Amazon and Barnes and Noble. It has also been recommended as a Washington Post Color of Money Book of the Month.
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