Has the Fed Found its Backbone?

Central bankers everywhere are publicly conceding that their creations (aka “markets”) are overpriced. Yellen herself has uttered the “B word” on more than one occasion.

So, it is with great curiosity that we approach another FOMC Jamboree that will either further inflate the myriad bubbles or seek to let just a little air out — ideally without popping them.

After nailing our downside target on Monday, SPX rebounded to slightly higher than our bounce target. Will it break out again? It all depends on Ms. Yellen & Co. and whether they can locate their long lost backbone.

Remember, at least 75% of the time, FOMC announcements/press conferences have led to a frenzy of algo activity that drives prices higher into the close. It’s part of the “FOMC has got our back” meme that investors have come to accept/expect.

A quick look at the S&P eminis this morning. The threat of a breakout is very real, but we have a pretty clear line in the sand with which to identify it.

My preference is to stay on the sidelines on days like today. The algo-driven rallies don’t always last, and there are often sharp spikes in either direction.