DailyPlay Update – May 4, 2022

For now, the SPX and QQQ are both holding key weekly cloud model support (i.e., the SPX at the bottom of its cloud; the QQQ from the Lagging Line hitting the top of its cloud).  I believe that seeing breaks of those levels – most especially on Friday closes – will start another downward leg that will make one glad that they had previously lightened exposure on rallies (from both earlier this year, and possibly even from the one that may be starting this week).

With today being the May FOMC rate announcement at 2pm ET, and Fed Chairman Powell holding his press conference shortly after, I am not looking to put on any new positions today.  I expect some potential morning position-squaring to bring some volatile trading, and then a more muted 11:30am to 2pm lull into the announcement.

If the Fed gives the expected 50 bp. rate hike at 2:00, then it will all be about Chair Powell’s underlying tone in his comments that will drive the market the rest of the day.  I suspect that only a 25 bp. hike would be a very pleasant surprise, with the market then likely ripping higher.  And a surprise 75 bp. rate hike would not likely be taken kindly, with a potential swoon looking the opposite to what we saw on Monday from 3-3:30pm ET, when the SPX rallied 80 points.

More fun and games to come tomorrow after I decipher Wednesday’s action and closing price. 

– Rick Bensignor
Chief Market Strategist