The Fed policy statement on Wednesday afternoon was almost exactly what was expected. The Fed raised rates by three-quarters of a percentage point, mentioned some economic slowing, and said it will continue its quantitative tightening program.
The market barely budged on the news, but when Fed Chair Powell hinted at a potential Fed pivot, the market exploded higher. Powell simply stated that there was a possibility that the economy may slow enough that there wouldn't be the need for another large hike, but that the decision would be made on a meeting-by-meeting basis.
The important fact is that Powell acknowledged that there is some weakness and that the Fed feels that its policy is working. He also stated that he felt there was enough strength in various areas of the market that a recession could be avoided. There is obviously some definitional issue with the word "recession," but the point he was making is that he does not expect a broad economic collapse.
As I've often written, the market loves to love the Fed. It tends to find a way to celebrate whatever it does, but after the last few meetings, there were very abrupt reversals. Some market players say technical conditions are better this time, but I expect to see some choppiness as we work our way through the earnings season.
The good news is that we continue to build some solid support, and that will help to provide a cushion if we pull back. Charts still need much more work, but they are improving.
Although Powell made some subtle hints about a dovish pivot, the Fed is still hawkish and is engaged in quantitative tightening. That will make it more difficult for the market to develop sustained momentum, especially as negativity seasonality is building.