The Horrible Case

When we examined the likely outcomes of next week’s FOMC meeting yesterday [see: Now and Then] we devoted a couple of column inches to the possibility that Wall Street would throw a fit, much like it did in October 2014, January 2015 and August 2015, to demonstrate how sensitive it was to the taking away of the proverbial punch bowl.

Having said all that, there is one other possibility that shouldn’t be completely ignored.  As we’ve seen in the past, a sudden, severe plunge in stocks can be very effective in changing the FOMC’s plans.

Were SPX to drop to, say, 1920, 1856 or 1823 in the next several sessions (6.4, 9.6 or 11.2%), there’s a pretty good chance that the Fed would delay actual implementation of a rate hike.

The words seemed rather silly as I typed them, particularly since every tiny dip was immediately bought yesterday.  With another of those now-routine 1% pre-opening plunges  facing us this morning, they seem a little less silly.

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