In the opening scene of the wonderfully silly Scary Movie, the sultry heroine comes face to face with the masked killer. She glances down at an array of conveniently placed objects: a gun, two knives, a grenade and a banana. She ignores the weapons, of course, and grabs the banana.
I think the Fed is in a somewhat similar position. They could attack the global slowdown and join with competing central banks, all of which have taken monetary stimulus to preposterous extremes.
Or, they could stick to their congressional mandate of maximizing employment, stabilizing prices, and moderating long-term interest rates. To equity investors, it would be the equivalent of grabbing the banana: a choice that would almost certainly lead to the death of the ongoing meltup.
This morning’s Q1 GDP read only increases the difficulty of their choice. While many FOMC voters would no doubt prefer to thumb their nose at presidential interference, no one wants to be known as the one who pricked the equity bubble.
Our current analog suggests that whatever choice they make, investors will be disappointed.
continued for members…
With a whole slew of important economic data points to come between now and the rate decision, there could be even more reasons for the Fed to punt — or to cut rates 0.25 while making hawkish comments.
The equity picture hasn’t changed. We should continue pushing a little higher with SPX’s ideal target being the 2.618 Fib extension at 3047.34 on Tuesday. Remember, past such instances have fallen 4-10 points short of major Fibs — meaning we might have already seen the highs.
VIX: doing what it can to keep stocks from collapsing.
Currencies: see yesterday’s comments about EURUSD. Today should mark a significant low as occurred on April 30.
USDJPY is just marking time. 
And, DXY has probably topped again.
Oil and gas continue to bounce without going anywhere — still poised for a nice selloff.
More later.
UPDATE: 2:15 PM
I know this is incredibly boring. But, so far, it seems like things are following our path.
Obviously, we won’t know until we get there whether or not SPX will reverse. Ideally, we’ll get a blow off top of sorts, but no guarantees. Also obviously, a push through 3047 would be a very bullish sign — though as we saw in Jan 2018 it’s no guarantee that the Fib level will hold. Stops are vitally important for those placing directional bets.
Speaking of directional bets, BA has broken down and is likely to test the white channel midline at 330-334 next week. If the white channel midline breaks down, it opens up the .786 at 325 and the .886 at 310. 