Market Fights Off Fed-Induced ‘Black Cloud’

2021-06-17

Did the Fed reveal real inflation and shift the market direction?

“Yes,” and, “no.”

Consider the Fed’s acknowledgment a validation of what most traders — and everyone else — already knew. Inflation is rising and impacting economics and the stock market.

For traders, the Fed meeting and press event on Wednesday could be considered a caution day. The nervously anticipated Fed presser is out of the way — no black cloud descended from on high — and the market uptrend appears to have survived. No need to panic due to the Fed acknowledging inflation or planning for interest rate hikes — in two years.

If the uptrend is in play, why fight the trend?

The market remains volatile, chopping away with almost daily swings like a see-saw. Still, this resilient market keeps grinding higher like a tormented trudge up a long, low-grade staircase.

With the trend leaning higher and still bullish, the practical standpoint for traders is to be aware that this market may be ready to retest lower levels before pushing higher. Don’t get caught flat-footed in an express elevator down.

Simpler’s traders remain nimble while holding tight stops on positions and limiting risk while waiting for opportunistic patterns to set up. Playing the volatility in any direction the market moves can present opportunities, yet maintaining cash while waiting for clarity in this market is a viable plan.

During and after a Fed-induced caution day, traders can be prudent, be flat, and get back into the swing of the market at the next opportunistic setup.

We Saw: Agreement around the horn that inflation is underway —

  • Many calling for calm, while cautious of a “down elevator”
  • Mortgage rates, gas, staples, inflation inch higher
  • Dollar rising while China meddles in metals pricing

We’re Watching: Buying opportunities with simpler patterns, setups —

  • Picking only best options as market uncertainty remains strong
  • Not holding trades too long and seeing profit evaporate
  • Setups, for now, that aren’t commodities, tech, or metals