Pre-F_O_M_C Update

I have to abbreviate this update to get it out before the 2 PM policy statement. It's pretty rare for us to catch an FOMC/ FED leak, However we have done it before. I'm not so sure that I would call this a leak and I'm not even so sure in the outcome otherwise I would be putting out larger positions and more ideas. However just like earnings, we really have no edge into the F OMC even if our longer-term scenarios or bigger picture charts do you have a strong edge, the immediate volatility and knee-jerk reactions can create opportunities or they may call for our patience.

So far the best argument I see for a short term market bounce based on Dovish FOMC comments is the USD update I put out just before this, Specifically the 10 minute chart looking like a countertrend bounce in the USD. If this were indeed the case that would suggest a near-term knee-jerk bounce in the market, followed by a larger move to the downside, as it looks like our igloo/ chimney Price formation is in place. I wish we had seen more extreme moves like the QQQ last Friday but we'll see where we go from here.

Any additional evidence would be on the 3C charts and those that do show the possibility of a bounce on volatility into the FOMC, however like the USD, contained

Even if the market has no idea, and I don't think that's the case, although I'm not saying there's a specific leak, remember perception drives the market.

Even if the FOMC where extremely hawkish, Wall Street can get a short-term bounce by setting up the move in advance just as we saw in Netflix over the last two earnings. For less sophisticated investors, price action drives their perception of the policy statement regardless of how incorrect they may be.

Here are a few charts showing some very short-term positive divergences on intraday time frames, which appear to be FOMC related. Also note where they end.

 DIA 1 min positive.

However it stops there, 2 min is in line so it's not a very strong divergence at all, even for an intraday. This brings up the chance of a knee jerk move that ends quickly.

 SPY 1 min positive.

SPY 2 and 3 min positive, still not much more than support for a knee jerk and a quick one at that.

At 5 min, where the charts really start to count, NEGATIVE, not even in line.

The 30 min trend for the larger picture, VERY negative, VERY ugly. The market looks ready to break from this wide, lateral range to the downside.

Beyond the $USDX charts in the last post which I think are the best argument for a bounce, although I am not making any such call as it would be pure guessing, these are the Index futures.

The IWM/TF charts are the most mixed with no real edge wither way, but they are not as negative as the ES/NQ charts which would suggest a degree of relative strength over the SPX/NASDAQ.

 ES 1 min intraday with a small positive.

TF 1 min intraday with a small positive

ES 7 min leading negative

NQ 7 min leading negative. This is where TF has no edge as just looks like slop.

ES 10 min leading negative

NQ 10 min also leading negative clearly. , again TF shows no edge and look sloppy, but because it is not leading negative like these two I would interpret that as relative strength. However, the charts are not positive for Russell 2000 futures, just sloppy.

 This is an example of TF/ Russell 2000 charts, 10 min. You can see how different it looks compared to ES and NQ. This is essentially the same for all of the lower time frames posted above.

And both NQ and ES 15 min charts are turning more negative by the hour, which is something I wanted to see.

During the policy statement I will be in radio silence, watching how the market reacts to each specific moment. Often we catch very quick glimpses that we would never see if we were not watching in real-time. I'll also be looking for any opportunities and volatility may cause that.

The market will be looking for the feds posture as to Q1's weakness. Obviously they must acknowledge it to retain any credibility, However it is to the degree that they believe it is transient but the market will be most interested in and their outlook on inflation

 Remember once again, beware of the knee-jerk reaction it is often spectacular but almost always wrong whether up or down. However a little common sense goes a long way in interpreting whether or not a knee-jerk reaction something more than that, For example if the market knee-jerked to lower on a policy statement that said"We will take rates in June", you can bet that's a real move. If the market knee-jerked higher on an FOMC statement saying, "In light of recent weakness we are considering a new QE program", you can pretty much bet does that is not a knee-jerk move. It's just common sense.

I'll be back shortly