E-mini S&P (September) / E-mini NQ (September)

S&P, yesterday’s close: Settled at 6406, down 16.75

NQ, yesterday’s close: Settled at 23,452, down 39.25

It is Fed Day. The bank concludes its policy meeting and rate decision at 1:00 pm CT. The committee is not expected to cut rates; according to the CME Group FedWatch Tool, there is only a 2.1% probability they cut 25bps. Furthermore, after the humiliation President Trump has inflicted on Fed Chair Powell, would the Chair even begin to signal the potential of a cut in September? There is already a 66.1% probability they will cut by 25bps at the next meeting. The question becomes, with much of the committee signaling the likelihood of two cuts via the Dot Plot at last meeting’s quarterly Summary of Economic Projections, does he begin to put September on ice? Let me remind you, I have believed the Fed should have cut months ago, and the drop in consumer inflation expectations over the last 60 days should have secured that. At the end of the day, if the Fed is worried about inflation, it is exorbitant consumer expectations that could cause it to become unanchored. Now, the data has continued to be upbeat with weekly Initial Jobless Claims ticking down, Atlanta Fed GDPNow for Q2 revised up to 2.9% from 2.4% yesterday, and a vast improvement in sentiment. Most importantly, the Fed has held itself to the uncertain effects from tariffs, and many of the August 1st rates match, or are at the April 2nd rates, while China’s trade truce is likely extended another 90 days, leaving the largest impact still uncertain. Fed Chair Powell has been embarrassed by President Trump, and he now has the home court advantage. This is a mid-summer meeting in which Powell can easily stand his ground, even coming off as hawkish, and use Jackson Hole next month to signal his policy shift.

Ahead of the Fed, we have the first look at jobs with the private ADP survey at 7:15 am CT. At 7:30, we have the first look at Q2 GD. How accurate was Atlanta’s model? Pending Home Sales are due at 9:00 am CT. The day is not done with the Fed, META, and MSFT report earnings after the bell.

E-mini S&P and E-mini NQ futures pulled back yesterday from testing major three-star resistance at 6445 and 23,610. The session lows in the E-mini S&P tested and held major three-star support 6401.50-6402.50, and the E-mini NQ held key support aligned with unchanged on the week. Constructively holding these supports opened the door for the overnight levitation to kick in. Today will be about the impact of the Federal Reserve meeting. Traders are positioned short the U.S. Dollar against other currencies, and if the narrative above plays out, there could be quite the unwind; a short squeeze in the U.S. Dollar. This would likely bring pressure to many assets, including stocks. If the E-mini S&P decisively breaks below major three-star support cited above, and yesterday’s low, which has been key support at….

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