Tomorrow, the Federal Reserve will raise interest rates by 25 basis points. Everyone and their mother will lock eyes on CNBC and Bloomberg at 2:30 PM…
They'll hang on every single word spoken by Fed Chair Jerome Powell. Are they still forecasting a mild recession at the Fed?
Are asset prices (equities) too high?
All questions will be answered.
Not that it matters - the only thing that actually matters is price action.
So, let me make this easy for you. When the Fed raises rates tomorrow, don't do anything at 2 PM.
Wait until Jerome Powell speaks. Don't worry… he's going to drone on and on… and on… for a while.
But, come 2:35, pay very close attention to the price action of the market.
This Is a Very Reliable Pattern
If the S&P 500 falls into its third-standard deviation (in layman's terms, that'd be an aggressive move lower - you'll know it when you see it) while he talks, it'll likely be a good opportunity to buy the dip for a short period of time.
Why? Because, for the past 18 months, the market has been picking its direction between 2:35 PM and 2:37 PM whenever Powell has spoken.
This is what happened after his June speech…
And then, as we move into the last hour of trading, look for the market to turn in a different direction. Why? Because the pattern for this market has been a pop after 2:35… and a selloff into the last hour of the day.
To be honest, I don’t actually care about the Fed’s actions tomorrow.
I’ll be driving across Alligator Alley to have dinner in Boca Raton.
But if you’re a trader – the price action is there for you to take. Use the standard deviation bands offered to you around one-minute Volume Weighted Average Price… and buy if the market sells off in the first five minutes of Powell’s statements.
Then, set a tight trailing stop, and look for a reversion in the afternoon. That’s been the trading strategy…
In a broader context market momentum is still green right now, although there is some weakness starting to creep in around the edges of the Nasdaq-100.
I am a bit concerned that we might see some strong profit taking soon on the energy front.
If energy sells off, the rest of the market can go with it rather quickly. Keep your trailing stops tight, and take what the market is giving you.
Stay alert,
Garrett Baldwin
Florida Republic Capital
(Available on Substack)
