Welcome to another FOMC day.  If you read yesterday’s post, there is absolutely nothing new to report today.  SPX, DJIA, COMP, NDX and NYA are all at or near all-time highs, while XLF and RUT are at important resistance.

As usual, there has been much speculation regarding the Fed’s future plans.  As usual, the FOMC will do its very best to not upset the markets.  What does this mean?

While they would love to see a steeper yield curve, more robust growth and higher inflation, everyone knows we can’t afford higher rates — hence the US dollar’s steady decline and an unwritten policy to keep inflation near, but no higher than, 2%.

Since the dollar has been in a funk, the yen carry trade hasn’t worked so well of late.  And, since higher oil and gas prices could push CPI above 2%, that particular avenue has been of limited use.  Fortunately for bulls, hammering VIX has done an excellent job of driving algorithms and the 90% of share volume that they steer.

Chances are, today’s the day we find out whether or not our assumptions regarding interest rates, inflation, currencies and equity prices make any sense.

continued for members...

Since SPX topped 2500 on Monday, everyone’s anxious to see whether it will hold.  The SMA10 is up over the previous 2490.87 high, so we’d have to consider that support if 2500 doesn’t hold.  Note that it hasn’t reached its latest 1.272 yet… …even though ES has……and has also seen its breakout channel break down.  If it breaks down through its SMA5 200 at 2504, it’s worth taking a crack at a short for 2490.Not to worry, there’s another rising channel waiting to take its place.About the only hard evidence we have thus far is from DXY, which has broken down ever so slightly.VIX is being VIX.

UPDATE:  10:27 AM

ES is testing its SMA5 200 and a little TL now.  SPX has no such target at that level, and obviously still hasn’t reached its 1.272.  It’s a mismatch that can usually be expected to resolve in the bulls’ favor on FOMC day.  But, if CL, RB, DX and USDJPY all decline as expected, we might get a completely different outcome.

UPDATE:  11:25 AM

Quick update on the initial reaction to the Fed statement.  SPX and ES appear likely to reach their SMA10 targets, particularly in light of VIX’s likely backtest of the broken purple channel bottom.  GC is tanking, reflective of the rally in DXY and USDJPY.  Note, however, that USDJPY is running into its SMA200.  As such, we’d have to consider the strong possibility that today’s rally won’t hold up after equity markets close. UPDATE:  2:50 PM

I had a conditional short recommendation in place for USDJPY:  to short it if it fell below 110 with a target of 106.50.  With it bumping up against the SMA200, I find this price level an even better entry point.  I’d short it here at 112.306, with relatively tight stops, still with the 106.50 target. UPDATE:  EOD

Not much new from Yellen.  It took a 9 handle on VIX and USDJPY racing up above (and holding) its SMA200 to get SPX back to green (+1.59) at the close. I see no need to alter our outlook.  Yellen admitted the Fed is clueless re inflation, yet I’m pretty sure someone will take strong action in the next few days to prevent a 2%+ CPI print.

DX is a little dicier, more of a technical move I believe in order to prop up stocks.  I’d look it to back off the white channel midline and for USDJPY to drop back through its SMA200 as the FOMC euphoria wears off.