Conditions Are Ripe for 'Sell the News', But Dip Buyers Are Hungry to Do Their Thing
It won’t take much downside to create attractive entry points.
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The S&P 500 is hitting a new all-time high for the fourth consecutive day on Wednesday as investors await significant news flow.
The Federal Open Market Committee will issue its interest-rate policy decision at 2 p.m. ET on Wednesday, followed 30 minutes later by a Jerome Powell press conference. There is near certainty that the Fed will cut rates by a quarter-point, but market participants will be looking for hints about what lies ahead. Concerns about inflation have nearly disappeared, while worries about slowing employment have gained steam. That suggests that the Fed will stay dovish.
There is currently an 85% chance of an additional cut on December 10, but the odds of a cut beyond that point are mixed. Powell’s press conference is likely to affect expectations, and that could further boost the market if he is seen as leaning more dovish.
After the Fed decision, Alphabet (GOOGL) , Meta (META) , and Microsoft (MSFT) are due to report earnings after the close. All three stocks have run up with the S&P 500 to new highs, but Microsoft and Meta are pulling back ahead of the news amid concerns of a sell-the-news reaction.
In addition to the Fed and earnings, President Trump will be meeting with President Xi of China on Thursday, and there are indications from both sides that a trade deal with South Korea will be announced. The big benefit of these deals is that they remove tremendous uncertainty, but this news is already anticipated, which creates some sell-the-news risk as well.
While there is an increased likelihood of some selling into this newsflow, there will likely be solid support and some aggressive dip-buying. The dip-buyers are hungry for an opportunity to do their thing. They had an opportunity in mid-October, but plenty of buyers missed out, and they are hoping for another chance to put some cash to work.
There are a lot of bulls that don’t want to chase this extended technical action, but they will buy shallow pullbacks very aggressively. While technical conditions make it challenging to put money to work, it won’t take much downside to create an attractive entry point for some new buys.
At the time of publication, Rev Shark had no positions in any securities mentioned.
