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FOMC Minutes This Afternoon - Here’s the Expected Reaction

Posted by Pete Stolcers on May 22

Posted 9:30 AM ET – A daily chart of the S&P 500 reveals many overnight gaps that reverse the next day. This pattern during the last two weeks is a sign of indecision and we can expect it to continue for at least another week.

Trade negotiations with China are strained, but a G20 meeting between Trump and Xi on June 28th will keep the bottom from falling out. A US trade team is headed for Beijing next week. Sanctions against Chinese technology firms are likely to increase. The US could add another 5 firms to the blacklist and the market is trading lower on the news.

The FOMC minutes will be released today. There has been a lot of “Fed speak” recently and I’m not expecting any surprises. They are neutral.

European flash PMI’s will be posted tomorrow and they could also be a non-event. Activity has improved slightly in the last month, but the growth rate is dismal.

Swing traders should remain in cash. The market lacks a driver and stock valuations are at the upper end of their valuation range. The downside risks are greater than the upside rewards. US/China trade negotiations have soured and the global economic backdrop is soft. I believe the major moving averages will be tested and we will evaluate support when that happens.

Day traders should look for early opportunities. The trading range will be fairly tight after the first hour and volume will decline ahead of the FOMC minutes. I expect to see an early range and I believe the market will stay in it the rest of the day. We’re in a pre-holiday environment and the activity will be light the rest of the week. Use the first hour range as your guide and fade the extremes. Support is at SPY $285.

We are likely to test SPY $277 in the next two weeks.
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