Monday, September 19, 2016

If There Is A Fed Hike We Can't Say They Didn't Warn Us

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*The Fed and the BOJ have key decisions Wednesday.
*The BOJ warned us that further moves can hurt Japan's financial players.
*Key Fed officials have warned the street to expect a rate hike which has fallen on deaf ears.
*A rate hike would be a risk to markets. A BOJ decision either way may be a risk to markets.

We hit some volatility in the last week. It's been a while since we saw this type of volatility. Volatility is usually associated with down markets (NYSEARCA:SPY). We have major events this week with the US Fed and BOJ decisions both coming on Wednesday.
Quick Review
*On August 31st (Showing Cracks) ahead of non-farm payrolls ("NFP") we wrote,
"The key SPY level of 217.68 needs to be watched. If the market closes below it with the good jobs news behind it, we could see more weight on stocks into the FOMC meeting. If the jobs number is weak we'd expect a selloff."
The jobs number was weak thereafter. The market closed below our key level several times before its big drop September 9th.
*On September 6th we reported that hawkish Fed officials were speaking that week.
*On the morning of September 9th, the day of the big drop of the S&P 500, we put out a piece showing how the Beige Book may have hinted to a pickup in August. That would be despite the dovish calls after the NFP.
*On September 12th at 10 AM before the big move up in the market we wrote,
"We are still bearish and would not get long but we think after a big fast move it's important to know this is a decent profit."
The market rallied hard into and after a speech by Fed Governor Brainard.
*On September 14th we pointed out SPY was in no-man's land and either needed to go all the way back up to 218 or settle into 209-212. We were biased for the lower level.
The market is roughly in the same place which means we still expect downside from here.
Here's How SPY Looks Now

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