FED ANNOUNCES DOVISH HIKE – WALL STREET POSITIONING CORRECT – SMART MONEY SELLS INTO THE STRENGTH

To gain an edge, this is what you need to know now.

Dovish Interest Rate Hike

Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

• In the Morning Capsule, we shared with you that Wall Street was positioned for two potential outcomes from the FOMC meeting.  Regarding one of the two potential options, we wrote:

A dovish hike of 25 basis points is being given an 80% probability by Wall Street.  On the surface, the combination of dovish and raising interest rates seems to be an oxymoron.  A dovish hike means that the Fed raises the rate but is very dovish in its comments.

• This time Wall Street positioning proved to be correct.
• The Fed raised interest rates by 25 basis points.
• Here are the key points from Powell’s press conference:
  • The rate hike was supported by a strong consensus.
  • Powell said the disinflation story is intact. Goods inflation is coming down, inflation in housing services is coming down, and the Fed is waiting for signs for a decrease in inflation in non-housing services.
  • The Fed was previously considering higher rate hikes.  Tightening credit conditions offset signs of stronger inflation, which reduced the need for a larger rate hike.
  • Fed participants do not anticipate interest rate cuts in 2023.
  • The Fed will get inflation “down to 2% in time.”
• The chart shows that the momo crowd bought aggressively on Powell’s opening dovish statement in his press conference.
• The chart shows that smart money lightly sold into the strength.
• Smart money appears to be focusing on two key points:
  • The Fed is not planning to cut rates this year.  In contrast, the momo crowd is counting on rate cuts this year.
  • A soft landing appears less likely now than before.
• The VUD indicator is the most sensitive measure of net supply demand in real-time. The orange represents net supply and the green represents net demand.
• The VUD indicator is mixed.

Money Flows

The momo crowd money flows since the Morning Capsule are 🔒 (To see the locked content, please take a 30 day free trial).

Smart money flows since the Morning Capsule are 🔒.

Short squeeze money flows are 🔒.

A Special Note To New Subscribers

Note the smart money behavior.  Smart money tends to sell into strength on strong up days.

New subscribers should consider adopting smart money’s way of investing and trading.

Sentiment

Sentiment is 🔒.

Sentiment is a contrary indicator at extremes.  In plain English, this means that when sentiment becomes extremely positive it is time to sell and when sentiment becomes extremely negative it is time to buy.

Close

Orders on close are indeterminable due to high volatility.

There is merit to watching the pattern of market on close orders as they represent the day’s dominant net cumulative activity by many professionals and funds.

Gold

The momo crowd money flows in gold are 🔒 since the Morning Capsule.

Smart money flows are 🔒 in gold since the Morning Capsule.

Oil

The momo crowd money flows in oil are 🔒 since the Morning Capsule.

Smart money flows in oil are 🔒 since the Morning Capsule.

Buy Zones And Buy Now Ratings

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Nigam Arora

Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.

Dr. Natasha Arora

Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.