Equity markets are set to open lower after Federal Reserve Chairman Jerome Powell comments on Wednesday. Once again he spooked the markets when he announced that the Federal Reserve will keep interest rates near zero for years until the U.S. economy heals from the effects of the Covid-19 pandemic and the labor market recovers.
“My sense is that more fiscal support is likely to be needed. Of course, the details of that are for Congress, not for the Fed. But I would just say there are roughly 11 million people still out of work due to the pandemic and good part of those people were working in industries that are likely to struggle. Those people may need additional support as they try to find their way through what will be a difficult time for them,” he said.Chairman Powell
Price action is basing inside a tight range between 331 ~ 343. Stochastic is oversold suggesting Thursday morning weakness will test the lower part of this 7 day range.
We’ve been watching this 335-340 range as our target into OPEX, that said overnight volatility is a caveat for now. SPY and the S&P500 will open under the Volatility Trigger area of 3385 which does infer the indices are exposed to downside volatility. Because the largest gamma strike area is from 335-340 we still think 335 is the key support level. The large OI zone at this level is acting like a magnet, pulling price action in that direction.
September OPEX top range = 350, with potential to push down to 320 with break of Volatility Trigger.
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