What the Fed Won’t Tell You

It’s pre-Fed Tuesday, and I don’t trust this market sell-off…

It also happens to be the day before VIX expiration.

Currently, there’s an 84% chance that the Fed will raise rates to between 300-325.

Image from CME group

Since we know the Fed will be raising rates, we are seeing a phenomenon called “pre-FOMC drift,” where we see a sell-off pre-Fed then a drift today, the day before the Fed meeting. 

If the market breaks the low of the day, and VIX breaks the high of the day, I will change my tune, but until then, I think the market will drift higher into tomorrow. 

And there are two big things holding the market up today…

First, Apple Inc. (Nasdaq:AAPL). As AAPL goes, so goes the market…

And today, it’s holding strong, currently trading at $157.00.

Image from wallstreet.io

As long as AAPL holds, I think the market will ease a bit higher again. 

Next, the VIX.

Volatility is also guiding the S&P 500…

Here you can see the inverse correlation between VIX and the S&P… and when VIX moves, the S&P moves the other direction: 

In expectation of this gentle ease higher, I have some options plays in mind to trade.

Every weekday I trade the SPX expiration and this week is no different. Even though the market has been volatile so far this week, I think we are likely to see a slight drift higher through the end of the day.

JOIN US in the Expiration Trader room to play today’s butterfly if you’ve traded them before. 

Or sign up now so you can start learning and paper trading these every single weekday. 

I’ll see you then,

Mark Sebastian

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