Fed Meeting Does Not Change Outlook — Fade Any Rally

FLASH COMMENTS:

Today’s Fed meeting, 75bps increase in the fund rate, and the post-meeting press conference by Chair Powell does NOT change my outlook at all. 

My research suggests that we are in the early stages of a negative earnings revisions cycle that is not priced into equity markets and thus my views are not impacted by today’s Fed news.  

My work is also signaling that the underperformance of Growth/High Multiple/Low-to-No Profits stocks that have thus far been the leaders to the downside is nearing a definitive shift where they begin to outperform and hand off the relative weakness to Value/Cyclicality. 

The price action for the overall equity market may be exceptionally volatile over the next week as investors digest today’s actions by the FOMC, the VIX options expiration tomorrow, and the Friday equity options expiration. Indeed, the bounce after Chair Powell’s press conference could possibly last until the middle of next week as the overall equity market is tactically oversold. Still, my key indicators strongly suggest that this is yet another rally to fade, raise hedges, or look to short once it peaks.  

Thus, I reiterate that my next downside target zone of 3600-3500 is still intact. Also, I am evaluating the possibility of introducing an even LOWER target, but I am not quite there yet. However, if no event significantly lowers energy and commodity prices, the odds are rising for the lower target range, which I will address in the coming weeks.  

Stay patient. My work says this is going to take some time. Keep alert. I expect an excellent opportunity for investors, but it’s still on the horizon.

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