In a desperation move, the Federal has leaked that it will raise rates by .75% today.
It’s something we haven’t seen since Alan Greenspan was in charge of the Fed back in the mid-90s.
Jerome Powell was asked about hiking by .75% in future meetings a couple of weeks ago and he said it wasn’t on the table at this time.
But what do I always tell Power Income readers?
Don’t trust the Fed!
The bottom line is this …
The market immediately priced in a much higher chance for a .75% hike today. You can get this data at the CME and heer is a snapshot from yesterday.
More importantly, I’m going LIVE with an all-hands Fed Focus meeting today at noon.
This link will get you into the room, and there’s NO cost to attend.
But first …
Today, we’ll take a look at the market’s positioning heading into the Fed meeting and a possible scenario to watch.
The Fed is Making a Mess of the Market
The Fed is making the biggest mistake in its 110 years of existence and the market is finally starting to price it in …
You can see this best in the chart below. The market is now pricing in around three rate cuts after March 2023, based on the Fed ending its tightening cycle prematurely.
The Fed knows this and is just going through the motions, but at least the market is beginning to look ahead.
Debt levels are soaring as consumers, corporations and the government are getting killed by higher interest rates and higher costs.
The Fed will ultimately admit they must go back to printing money to avoid a debt crisis before the end of the year …
So, if the Fed announces a .75% hike today and stocks go down, it may be a great opportunity to buy, and here’s why.
The extra .25% will be viewed as Powell trying to speed up tightening, knowing time is running out because of how weak the economy is …
This will trigger a 200- to 300-point relief rally in the S&P 500 Index ETF (SPX). The sentiment and positioning is in place for this. Check out sentiment …
The bear camp is very crowded!
Plus, with a massive amount of puts expiring on Friday, dealers who were short puts and short stock (as a hedge)will be buyers.
The chart below shows the SPX 3,700 level with the highest put open interest, which provides strong support through Friday’s expiration.
You can play for the relief rally or use the rally to reset short positions near the 4,000 strike.
Let’s discuss when I go LIVE today at noon in a totally open, totally free session.
These quarterly expirations are good opportunities to take advantage of options flow that drives the overall market.
Bring It Home
I expect the market to receive pretty bad economic data over the next few weeks …
But remember bad news for the economy is good news for the market now.
And joining my Power Income Trader is good news for you. Members receive specific details of all the trades I put on for myself – like the 82% and 120% winners I closed this week.
Call 888-872-3301 and speak to our Customer Service Team starting at 9 a.m. today or email [email protected] anytime.
And be sure to stop by at noon for my special live session!
Live and Trade With Passion My Friend,
Griff