The market is holding up well on Wednesday morning as traders and investors await the Fed interest rate decision at 2 p.m. and the press conference by Chair Jerome Powell 30 minutes later.
The odds of a quarter-percentage point rate hike are currently at 86%. The more important news will be the Powell press conference and hints about how Fed policy has shifted due to the banking crisis.
What is most interesting about market as we await the news is the strength: The banking crisis has had no real impact on the S&P 500 or the Nasdaq. Small caps have been relatively weaker, because of the large number of small financials in the Russell 2000, but no one saw this bank crisis coming, and no one has done a good job of predicting the market's reaction to it.
When price action is this strong, we're likely to see strong dip buying, so, if we see sell-the-news reaction to the Fed, then I'll be looking for dip buyers to jump in fairly fast. Also, expect so much interest in dip buying that the buyers may turn into chasers if the Fed is viewed as market-friendly.
The real response to the Fed may not be immediately apparent. Several times in the past year, the response to the Fed was reversed the next day.
I'll be looking for some signs that the Fed decision is a catalyst for a change in market character. Right now, the bearish narrative sounds very logical and compelling, but the bulls are running over it with liquidity-driven action. There just isn't any real worry or concern about the potential for a recession or continued high levels of inflation.
I have a long list of stocks that I would like to buy, but I see no advantage to buying them before the Fed decision. Once things calm down after the news, I'll look through the charts for potential entry points.
