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Markets in Wait and See Mode ahead of FOMC, but Uptrend remains Intact

Key Themes:

1. Economic data has improved since December when FOMC embarked on its first rate hike, yet market price action has deteriorated.  Given that Fed fund futures shows a very low probability for any action in today's decision, the market seems to be paying attention to market volatility much more than Economic data.  Most market participants anxiously awaiting some guidance from the FOMC as to what the future holds for future Rate hikes and guidance. 

2. S&P has stalled out a bit in the last few days, (as part of its ongoing uptrend) as highs in Futures (2022) were made last Friday at around the time of Europe's close.  Yet no material technical damage and yesterday's lows near 1995 will be important to hold on pullbacks post decision.   Key support for the next few days lies at 1995-6 and then 1968-70.   The area at 2011-2015 is resistance, then 2022.  In the event that trends from mid-February are broken, with S&P undercutting its 10-day moving average which lies at 1999.7.  Keep in mind that S&P futures have not closed below this 10-day moving average during the entire rise in the last four weeks, so a daily close would likely indicate at least temporary trend change.

3. Minor bounce in WTI, Brent Crude this am, with OPEC/Non OPEC members announcing a meeting in Doha April 17th to discuss details of the Output freeze with or without Iran.  However, the damage looks to have been done in the last few days, and It's worth reiterating that WTI CRUDE broke its 1 month uptrend yesterday, and given the correlation with SPX, is a minor negative.. WTI looks vulnerable down to 34, and potentially 32.50 on this drawdown, with rallies to 37.50-38 presenting an attractive risk/reward selling opportunity.

4.  Kuroda "About-Face" on NIRP, dropping further rate cuts from the Statement, while tallking up the possibilities afterwards has resulted in Yen weakness up to USDJPY113.75 ahead of Europe's open before pulling back.  USDJPY remains in range-bound consolidation from mid-February, not enjoying nearly the same rally as S&P futures.  Above 114.50 would be quite positive, allowing for rally up to 116, and helping to provide likely tailwind for US Equities.  Meanwhile, signs of Yen strength likely would coincide with Equities falling , which would take initially a move under 112 and close under 111.

5.  Healthcare's weakness caused XLV to get down to key hourly support, but failed to do much technical damage, and likely is buyable after weakness in the last few days.


Overall, markets remain in "Wait and See" mode, after stalling out prior to today's FOMC decision with two of the lightest volume days of the year.  Minor drawdowns haven't affected the structure of this rally from February 11, and until that happens, its still a "MUST" to stick with the trend until there is evidence of technical damage.  Small-caps have slowly deteriorated at a quicker pace than the broader market in recent days, but this also hasn't affected the structure of S&P, NASDAQ, which remain in uptrends from mid-February.  Crude oil's breakdown along with the minor stabilization in the US Dollar have hurt both Materials and Energy in recent days, as some mean reversion has occurred to offset last month's strength.  However, the strength in Technology in recent days is thought to be a real positive, and if Financials can build on recent strength and join in, that should bode well for markets to power through on recent strength, which is what's expected on a 1-2 month basis given the breadth improvement.  For now, it's proper to follow the trend, using breaks on a closing basis to put on hedges, but otherwise, sticking with this uptrend and thinking that additional strength is likely.


 

S&P has churned in the last couple days, but tough to make much of this sideways action, and until/unless 1995 is broken on a CLOSING basis, one should use pullbacks to buy, with the trend remaining positive despite the lagging in Small-caps and ongoing Defensive tone to this rally.

S&P maintains its rally from February 11, and for those concentrating solely on S&P, it's tough to get bearish solely on Crude's breakdown, or on the weakness in the Russell 2k.  The 10-day moving average lies right below 2000 and until violated, this is a good guide along with the ongoing uptrend, and a bullish stance remains correct.

WTI Crude violated its one-month trend the other day and now has bounced on talks of the Output Freeze meeting being set for April 17th.  Technically, the trend gave signs of being broken yesterday, and looks like a good risk/reward to lighten up, with breaks of $36 being more likely than a breakout above $39.   At this point, breaks of $36 would cause selloffs down to at least $34, if not $32.50.

Healthcare's selloff has not violated the trend on hourly charts, as seen in XLV charts, with $67 likely providing an attractive risk/reward area to buy dips.  Movement down under $67 would allow for at least another $1-$1.50 lower before this stabilizes, but for now, a move up to $68.25 to fill this recent gap is likely.  Moreover, any rally to get over $68.75 would provide a move up to the low $70's.

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