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Will Fed Chair Powell Upset the Market

Mar 17, 2019

For 2 weeks in a row, the SP500 has smashed its weekly option implied move by 2 standard deviations. This is significant when we consider the frequency (3 or 4) of real-time risk assessments from traded weekly index options and the dollar volume involved.

Good Evening:

For 2 weeks in a row, the SP500 has smashed its weekly option implied move by 2 standard deviations. This is significant when we consider the frequency (3 or 4) of real-time risk assessments from traded weekly index options and the dollar volume involved. Option markets are inefficiently valuing risk.

For the coming week, the option implied move in the SP500 is + / - 33 points. This equates to an expected range of 2855.91 to 2789.05. We fully anticipate the edges to be tested.

The most significant potential catalyst is Fed Chair Powell's Press Conference following the FOMC Rate Decision.

Institutionally important Weekly Trends remain up, and as we've eclipsed the upper boundary of the Volatility Box (2811) that developed late last year, the question is whether continued FOMC Policy will catalyze us towards 2900 and all-time highs before high probability reversion Levels dominate.

Or, will divergence in the usual risk-on Small Capitalization stocks in the Daily Trend model mark the beginning of a change in market character?

Levels provide an actionable roadmap.

I focus intently on Levels and Smart Money Flow since they are precise reflections of behavior at price by dominant market actors. Markets are always in motion at any fractal period trading towards or away from key Levels. These have proven uncanny at marking key zones of acceptance or rejection of price across thousands of tested instruments.

Updated Levels computed using 30-minute price data to reflect a tradable overview are pasted below.

Have a great week.

All the best,

Scott

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