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Market Behaves Before and After Fed Decisions Is Different

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https://realmoney.thestreet.com/markets/how-the-market-behaves-before-and-after-fed-decisions-is-very-different-16111247
 
How the Market Behaves Before and After Fed Decisions Is Very Different
 
I'm adding to several stocks, but will get more aggressive if we see a negative reaction this afternoon.
 
By JAMES "REV SHARK" DEPORRE
 
Dec 14, 2022 | 11:02 AM EST
 
Market action in front of a Fed policy decision tends to be positive.
 
In 2022, the market has traded higher on Fed decision day six of seven times. Here is where the market was at 1:59 p.m. ET on each Fed day this year:
 
Jan 26: +1.51%
 
Mar 16: +1.25%
 
May 4: +0.41%
 
Jun 15: +1.15%
 
Jul 27: +1.41%
 
Sep 21: +0.78%
 
Nov 2: -0.35%.
 
It is after the decision that the action becomes much more volatile.
 
As I've often written, the market loves to love the Fed and tends to look for reasons to celebrate the decision, but several times this year, we have seen very ugly reversals to the downside on the day after the Fed.
 
Market players are hopeful that Fed Chair Powell will use the soft CPI report as justification for a possible pause, but I believe there is too much focus on CPI and not nearly enough on strength in jobs and wages. That is the area that creates the most difficulty for the Fed, and there are very few signs that inflationary pressures are abating in that area.
 
Nearly everyone is expecting a 0.5% hike this afternoon, so that will not be a major issue. The focus will be on Powell's tone and the areas he emphasizes. If he does emphasize the employment issue, I don't believe that the market will be very happy about it.
 
However, if there is a negative market response this afternoon, I am looking for some dip-buying bulls to go to work fairly fast. With the Fed finished for the year and only a few big macro reports remaining, there will not be any obvious negative catalysts. Bulls want positive seasonality and are likely to make it happen.
 
I have been adding to a few stocks whose charts that I like, including Direxion Daily S&P Biotech Bull 3X Shares (LABU), OraSure Technologies (OSUR), CECO Environmental (CECO), Beyond Air (XAIR), Xeris Biopharma Holdings (XERS), and Aehr Test Systems (AEHR) I will be more aggressive when the Fed is finished, but I do think there is a fairly high risk of a negative reaction to Powell this afternoon.