We have some buying in front of the Fed decision that is due at 2 pm ET, but it is likely just short-term flippers and some emotional reaction by those that don't want to miss a bottom. While the price action and breadth are good, it isn't at all meaningful in front of the Fed decision.
Current expectations are that the Fed is going to rise by 0.75%. An increasing number of market participants have been rooting for a more aggressive Fed mainly because they don't have the patience for a more incremental approach. Everyone wants to get these hikes over with, but the Fed moves slowly because monetary policy takes time to work, and they don't want to overshoot. It isn't easy to reverse course when there is a lag of months in the impact.
While the market is likely to celebrate a more hawkish Fed initially, it is going to quickly start to evaluate whether a big hike really is going to do what is hoped. The goal is to try to slow growth just enough to ease the pressure on prices, but the danger of pushing the economy into a recession is huge, and there are already a number of indications that we are on the slippery slope of a slowdown.
The market is likely to be disappointed with a quarter-point hike as it makes it seem that the Fed really doesn't have control and will be a force to be more aggressive at some point in the future. If inflation does not show some signs of cooling soon, the market is going to be very unhappy with the Fed's timidity.
My game plan is to do little until the market has an opportunity to digest the news. I have a good list of stocks that I like fundamentally, but fundamentals don't matter right now, and the technical action is very poor. I want to see better chart action before I put more cash to work, and that means we have to deal with whatever volatility the Fed may create.
There isn't any reason right now that a significant low is forming. We could see a good bounce on the Fed if Powell says the right things, but I don't trust it to last when we have such an extreme confluence of negative economic news to contend with.
