Stock Market Churns Ahead Of Fed Rate Hike News
The stock market churned through a mostly flat day before ending slightly down across the board.
Lethargic movement in the equities could be attributed to market participants waiting in anticipation of the Federal Reserve (Fed) announcing any further benchmark interest rate hikes on Wednesday.
Despite the uninspired movement, Simpler’s traders were looking into certain market segments with potential for trades.
Stock market mostly flat ahead of Fed rate hike news
The proverbial elephant in the room this week in the stock market is the Fed and the close of the Federal Open Market Committee (FOMC) meeting Wednesday.
A projected rate hike of 75 basis points, or .75%, is expected in the afternoon. No one is sure just how this expected rate hike will affect the market or if the Fed might actually slow its plans with a lower raise.
As the market slugged along this week with back-to-back down days, the Simpler Trading team worked to identify possible trades that may not be influenced by any Fed decision.
One possibility is a big-name technology stock that was perceived as invincible during the pandemic-influenced market.
Google parent Alphabet (GOOGL) has been weaker than other big tech tickers the past few weeks. This includes weak third quarter earnings results posted last week with both earnings and revenue coming in less than expected.
Allison Ostrander, Director of Risk Tolerance at Simpler Trading, has alertly followed how GOOGL stock price is moving and how she can trade through the looming Fed news.
She sees GOOGL testing its 100-day simple moving average this week and is looking for the stock price to continue its trend.
“If the Fed news does cause a (market) bounce GOOGL still has the ability to maybe do its own thing to the downside,” Allison said. “If the Fed news creates negative market reaction then that could be the catalyst for GOOGL to continue lower.”
This double-edged possibility for downside pressure has Allison watching GOOGL for a continuation of its bearish trend. GOOGL has been on a long slide having dropped from $144.40 in January to its close today at $90.47, down 4.27% on the day.
“I like the possibility that Google could continue to roll to the downside and continue with that next leg lower,” Allison said.
Allison is looking for Google to stair-step lower over the next few weeks before testing a new support level.
“Google to me, with the squeeze still valid with how much room there is with momentum… I like the possibility that this could just roll over and keep going,” Allison said.
News events are points of caution this week and next
Allison plans to be cautious with capital exposure before the Wednesday Fed announcement. She will give any options setups time to work, even working plays into mid-November or even December.
“I’m looking for plays that are inexpensive that I like the setup on, but I can keep my risk low,” Allison said.
Allison also highlighted news events this week and next that could turn into market-influencing catalysts.
The Job Openings and Labor Turnover Survey (JOLTS) report released today was not what the Fed was working toward in its efforts to curb inflation. The Fed wants fewer jobs while the national jobs report showed job openings rising to 10.7 million at the end of September.
Next up for economic data reports is the release of U.S. Consumer Price Index (CPI) data on Thursday, Nov. 10. The Fed focuses on core inflation which measures rising costs, less food, energy, and trade services.
Core inflation has remained above Fed expectations in previous reports and this is expected to influence its rate hike announcement tomorrow.
Traders are encouraged to consider how any of these catalysts could set off sharp moves in the market.