The market is essentially unchanged from yesterday, with VIX in a position to make or break this rally unless the FOMC delivers a significant surprise.

We’ve seen this movie before: a sharp rally into a Fed meeting or CPI report that wipes out the put buyers and positions the market for a drop from a higher price level once the disappointing news is delivered.

There is widespread expectation of a 75 bps hike, but less agreement about whether the FOMC will be as dovish as the market’s latest rally would suggest.

continued for members…

As discussed yesterday, the rally leads to the top of the falling white channel – unless it breaks down. Personally, I lean toward another leg down. I don’t think the Fed can be very happy with this rally and the loose financial conditions it reflects.  But, we’ll see.

DJIA reached its SMA200 and is faltering. Would a breakout serve the Fed’s purposes?  I think not.

And, note that COMP has still not done any better than backtest the long-term channel which is still broken down. The biggest change since yesterday is the very substantial recovery by TNX, which had dipped below 4%.Oil and gas have left the door open to a big downdraft… …as have the EURUSD and USDJPY. DXY has clearly not broken down and is testing its SMA10 and SMA20 again. Stay tuned…