Published on

**WATCH BEFORE TOMORROW** The Fed Meeting & Stock Market Analysis SPY QQQ IWM

Introduction

As we prepare for the upcoming Federal Reserve meeting, it's crucial to reflect on the June summary of economic projections and anticipate its implications for the market. In this analysis, we'll discuss potential outcomes from the Fed, focusing on GDP, unemployment, inflation, and the federal funds rate. Additionally, we'll examine the technical aspects of the SPY, QQQ, and IWM indices.

Economic Projections Recap

The June economic projections presented the Fed's expectations for GDP, unemployment, and inflation through 2025. The GDP was previously estimated to grow at approximately 3%, driven primarily by consumer spending, which accounts for about 70% of the U.S. GDP. This consumer strength sets a positive backdrop, crucial for the so-called "Goldilocks" scenario—a situation marked by moderate growth without inflationary or recessionary pressures.

GDP Implications

An adjustment to GDP projections during tomorrow's meeting is essential. A drop below the 3% mark could trigger negative reactions in the market, while a number closer to or exceeding 3% would be favorable.

Unemployment Insights

The unemployment rate has been noted at 4.2%, and projections may indicate a rise. If the Fed raises its median estimates for unemployment significantly—moving past 4.2%—it could create downward pressure on the market.

Inflation Expectations

The trend of inflation is another critical factor. Markets will be looking for continued moderation towards the Fed's 2% target. A stabilization or decline in inflation would ease market anxieties, while any rise might create turbulence.

Federal Funds Rate Scenarios

Looking ahead, the federal funds rate will be pivotal in shaping market sentiment. The current estimates for the end of 2024 stand at 5.1%, tapering down to 4.1% in 2025 and further to 3.1% by 2026. It's essential to watch for cuts, which should be cautious and measured; a 25 basis point cut is deemed acceptable, while a more aggressive cut could signal that the Fed is lagging behind economic trends.

Technical Analysis of SPY, QQQ, and IWM

SPY Overview

The SPY has recently surpassed its upper trend line, suggesting a positive shift. However, it faces resistance near all-time highs that need to be broken convincingly for further upside potential. Key levels to watch are in the low 570s.

The QQQ has shown mixed signals, breaking past the top trend line but experiencing resistance in premarket trading. If it can stabilize above its current levels, we could see movement towards the 479-480 area. Attaining consistent support will be vital for positive momentum.

IWM Insights

The IWM, representing the Russell 2000 indices, has remained steady within a range of 216 to 218. The outcome of the Fed meeting will likely determine the direction the IWM takes moving forward.

Conclusion

Tomorrow at 2 PM, the Fed's announcements will undoubtedly serve as a pivotal moment for the markets. Observing how GDP, unemployment, inflation, and the federal funds rate unfold will equip investors with crucial information for navigating the stock market landscape.

Keywords

  • Federal Reserve
  • Economic Projections
  • GDP
  • Unemployment
  • Inflation
  • Federal Funds Rate
  • SPY
  • QQQ
  • IWM

FAQ

Q: What is the purpose of the Fed meeting?
A: The Fed meeting is meant to discuss monetary policy, including interest rates, inflation expectations, and economic growth forecasts.

Q: Why is the GDP projection important for the stock market?
A: The GDP projection is essential as it signals the health of the economy. A lower GDP can create negative pressure on stock prices, while a stronger GDP can boost market confidence.

Q: How does unemployment affect the stock market?
A: An increase in the unemployment rate can indicate economic weakness, likely leading to a decline in stock prices as companies brace for reduced consumer spending.

Q: What are the anticipated changes in the federal funds rate?
A: Analysts expect a cautious approach from the Fed, possibly implementing a 25 basis point cut but warning that more aggressive cuts may indicate economic distress.

Q: What technical indicators should I watch for SPY, QQQ, and IWM?
A: Key resistance and support levels, along with trend lines and overall market sentiment around the Fed announcements, are important indicators to follow.

Read More