Will Powell and the Fed double down on their “dovish” policy stance or not?  That’s the question and will ultimately drive markets following the 1pm CST announcement. Note: All major global central banks are dovish, and it’s clearly being reflected in the currency space. This is reminiscent of 2015/2016 when the high probability trade was to basically front run foreign currencies vs the USD on the short side vs the next major central bank’s dovish policy statement.  My humble opinion is telling me there’s a high probability that the Fed is NOT dovish enough at 1pm CST today – just based on some of our quantitative signals headed into the meeting. 

Keep an eye on the small cap index via the Russell 2000. Loaded with financials stocks and plenty of small domestic companies – the Russell bounced to a “lower high” and clearly rejected those levels yesterday. Small caps tend to lead on the way up and also lead on the way down. Our quantitative signal still suggests we’re bearish trend in the Russell on 3-6 month basis vs S&P 500 and NASDAQ signaling “bullish” trend.  Confusing?  Not really when you break down the components of each Index.  For example, the S&P 500 is loaded with Utilities, Reits, and Energy stocks which happen to be the best performing sectors in our “Growth decelerating/Inflation accelerating”  quadrant of our cycles model.  Hence, driving the SP500 index.    

Gold- is still one of our favorite positions in all of macro – but we’ll be bullish from the low end of our range (as long as we remain bullish from a qualitative and quantitative perspective).  1283.00 is where we buy more Gold. 

Oil- if the fed is NOT dovish enough, this will likely spur a rally in the USD and knock the Oil market back to the low end of our range.  Oil remains bullish trend with a range of

Yield Spread- has made a fresh ytd low of 13 bps.  Financial stocks and the Russell 2000 more broadly do not like it when the yield curve compresses.  This is a notable development and we’ll keep an eye on this headed forward. 

Good luck.

 Trading Ranges: 

Market	Trend	Range Low	Range High
SP500	Bullish	2760	2856
Nasdaq Comp	Bullish	7508	7820
Russell 2000	Bearish	1517	1575
10yr Yield	Bearish	2.56%	2.66%
VIX	Bearish	12.05	17.21
Oil	Bullish	56.51	60.23
Gold	Bullish	1280	1313
USD (Cash)	Bullish	95.3	97.75
EUR/USD	Bearish	1.11	1.14
USD/JPY	Bullish	110.9	112.05