Stock market's pre-Fed bounce a good sign, but raises the risk of a 'trap', technician says

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Stock-market bulls will soon find out whether they're getting ahead of themselves.

The S&P 500 SPX index rose Tuesday to post its highest close in more than two weeks on the eve of the most eagerly awaited Federal Reserve policy decision since the early days of the COVID-19 pandemic.

“The market did climb impressively yesterday to produce a new reaction high in the S&P 500. By itself I guess that’s a good sign, though I would have preferred to see such strength come after the Fed meeting and not before,” said technical analyst Andrew Adams in a Wednesday note for Saut Strategy. Fed Chair Jerome Powell’s news conference and an updated forecast of individual policy makers’ interest rate expectations will be closely watched for clues to the outlook for rates in the months ahead. A signal that the Fed is prepared to pause or possibly cut rates in the future would likely be taken as a positive for equities, Adams and other analysts have said.

 

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Powell and FOMC must consider financial stability above all else, otherwise risks freezing credit markets…

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