So the S&P futures closed above the 5570 level I pointed out yesterday, and today they’re continuing to push higher. But the big question is, with the Fed meeting next week, will this momentum hold?
The answer isn’t as simple as we’d like it to be.
On one hand, markets tend to go where they want to go, regardless of the noise. This is something I’ve always noticed. Financial media will get worked up about some upcoming report, and maybe the market has a momentary reaction to it. But in the end, the market goes where it was going anyway.
However, next week’s Fed meeting could be different.
This week, the European Central Bank (ECB) just cut rates again, which puts more pressure on the Fed to do the same.
And while the markets are hoping for a rate cut, if it doesn’t happen, we could see a correction. On the other hand, if the Fed does cut rates, expect the market to pop.
It’s also worth noting that there’s still strength in the job market. Unemployment is low, job openings are high, and wages have increased slightly — though they haven’t kept up with inflation.
This means that, despite the inflationary environment, we’re not in a full-blown recession territory yet, and that’s another factor weighing on the Fed’s decision.
All that said, here’s the bottom line:
If the Fed doesn’t cut rates, we could see a correction. If they do, the market could push higher. So, we’re sitting in a wait-and-see situation where the market is poised for a move, but it’s all about how the Fed decides to play this one.
Next week could be a volatile one. Stay sharp and keep an eye on 5656 — that’s the next level I’m watching on the S&P. If we can close above that, I think the rally could continue.
— Geof Smith
P.S. Targeting weekly income from a stable asset is perfect for times like this when the broad market doesn’t have full conviction. Here’s how I do it.
