For Futures Traders, the Countdown to the Fed is on

Six days from now we'll finally find out whether or not the Fed believes initiating a rate hike is a good idea. The investment community is polarized by the debate, and it seems the Fed might be too. We are still of the belief that they won't be looking to make any moves until the October or December meeting (most likely December), but either way the impact on the economy will be minimal.

Even if they raise the overnight borrowing rate a full percentage point over the next year, funds will be historically cheap. With that said, we will likely see a knee jerk reaction to the first rate hike but that doesn't mean the actual value of financial assets have changed. More often than not, equity markets moved higher overall in the early stages of a rate hike campaign.

The Fed and triple witching Friday are generally bullish events for the stock market

Although the CME has mitigated some of the impact of the triple witch with their addition of weekly expiring options, the event still influences the quarterly expirations (March, June, September, and December). The most common course of action is a short squeeze going into expiration. In this particular instance, we are referring to Friday, June 17th. The squeeze higher often extends itself into the time the June contract goes off the board, which will be at 8:30 am Friday morning. Accordingly, those wishing to get bearish this market should look for opportunities late next week.

Similarly, Fed meetings have generally enticed S&P buyers in the days before the FOMC's interest rate policy announcement. The two-day meeting begins on Tuesday, so we could see some buying early in the week.

This is what professionals call a WTH market (the "H" stands for heck).

Markets undergoing vast changes in their technical outlook on a minute to minute basis are best described as WTH markets.  I have no doubt that investors who have been trained, and thus far rewarded, to "buy the dip" were putting money to work early this morning as the S&P 500 screamed higher, but I also have no doubt they are now remorseful buyers.

The market looked equally as horrible on the close as it looked fantastic on the open. In such markets, typical market analysis techniques simply don't work and traders attempting to chase prices back and forth will wish they had never heard of momentum indicators.

In the past, WTH markets have been followed by big moves so traders should approach the S&P with more caution than usual.

There is a lot of event risk floating around.

If it isn't Chinese tariffs, it is a Trump administration investigation or Russian/Syrian turmoil.  We've gone from a world seemingly without risks throughout most of 2017 and early 2018, to a world in which there are peripheral threats in every direction. That said, despite what it feels like volatility isn't as high as it could be. Although we are seeing large point swings in the stock indices, the percentage of the swings is relatively reasonable given the height of the market and associated risks.  Further, the VIX is relatively tame when compared to past volatility.  
Where the ES goes in the short-run is obviously akin to a crap shoot.  Nevertheless, looking back at historical patterns it is generally a poor idea to bet against the S&P 500 as it is trading in a trough ahead of earnings season; earnings seasons have a tendency to reverse trends.

The market is pricing in a good payroll number as it reverses pessimism over North Korea

Late Monday afternoon I was watching a business news station. The panel was discussing the implications of a North Korea missile being fired (they were still trying to confirm the rumor that it had occurred). There was talk of a limit down opening to the E-mini S&P (the news broke during the daily afternoon pause of trading). They were right about sharp selling on the open but the bearish tone was quickly forgotten by tax reform talk. Even a 500-year flood couldn't deter the fiscal policy bulls. By Thursday's close all of this week's bearish headlines had been forgotten.

It's been a confusing day for the financial futures markets

Last week we heard several Federal Reserve Presidents tout their hawkish stance; they went as far as to say an April rate hike is on the table. However, the Fed Chair Janet Yellen, took the other side of that argument in her speech to the Economic Club of New York. She emphasized measured and gradual rate hikes were the "only" way to go. She reiterated, the pace will be so slow the process could take years. However, she also stipulated the decisions made in each FOMC meeting will be data dependent.

It seem to us, market participants would be better served simply ignoring the chatter of Fed Presidents, and focusing solely on the Chairman. Doing so would certainly reduce some of the noise caused by overzealous speculators.

Contrary to the Fed Chair's suggestion that the economy still needs to be nursed back to life, Pending home sales were up 3.5% in February and the Case-Shiller 20-city Index saw a 5.7% increase in January. Further, the March Consumer Confidence Index jumped to 96.2.