EB Daily Market Report - Quick Update - Wednesday, September 20, 2023

I just wanted to send a quick note out just as the Fed announces its latest policy statement.

Below are 4 critical charts that I follow closely:

5-day moving average of equity only put call ratio ($CPCE)

This is my favorite "go to" in terms of sentiment. This 5-day moving average remains very high at .812. It tells me that the most likely direction of the market is higher. Should we go lower near-term, this 5-day moving average will likely spike, further suggesting that the short-term weakness will not last.

QQQ vs. SPY

I'm mostly neutral with the "intraday" rotation between the QQQ and SPY. I do see a slightly improvement in the intraday QQQ:SPY, which excludes gaps. In other words, there's not much in the way of rotation intraday from the QQQ to the SPY. I view this bullishly.

XLY:XLP

While the S&P 500 chops and drifts lower, the XLY:XLP ratio - both including and excluding gaps - is breaking to new highs. It's very difficult to be bearish with the more aggressive discretionary (XLY) area leading.

IWM:QQQ

The big picture here favors the IWM as the relative low from early July, if we exclude gaps, remains higher. However, there's no denying that the IWM has been much weaker in the month of September. These ratios need to change, specifically move higher, if the IWM is to gain the relative upper hand in Q4.

The Fed is going to announce its latest policy decision in just a couple minutes. I remain steadfastly BULLISH the remainder of the year, but I do acknowledge that we could see weakness in the very near-term (next 2-3 days) if the Fed sends out one more scare. Beyond that, though, the sentiment reading above says this selling will not last.

Let's watch it all unfold.

Happy trading!

Tom