The value of U.S. Treasury Yield on Friday (15 September 2023) at 18:00 EDT is 4.33%. We should be expecting the latest number to come in today (18 September 2023).

In this article I would like to see how S&P500 will move before 20 September 2023, I will be using a few relationship and technical indicator to look.

CME Probabilities

Though the CME probabilities are showing that 99% are leaning towards Fed keeping the current rate constant.

If we consider similar scenarios in the past, Fed will have some other consideration to make the weightage, one of them I believe is how market is behaving to the uncertainty created by geo-political tensions.

There are some currency risks, if you have been following the news, more and more countries are reducing their reserve currency in USD.

BRIC currency though it is still some times away before we see the realization, but I think we should be aware of the impact to cross border trade.

Imagine this, if the participating countries start using it for cross border trade with more benefits than issues, that might speed up the adoption.

What will happen to US banks and treasury?

U.S. Treasury Yield 10 Years

I have been following the trend of how 10 years U.S. Treasury Yield will move relation to S&P 500, they are currently in an inverse relationship.

But if we look closely to how S&P 500 move when yield increase, there are times that both rises, because of other economic factors. This is why I believe it is important that we understand how Fed will be deciding the rate hike.

If the possibility of rate hike increases, then yield will move up, but if Fed decide to hold the rate steady, will the yield still remain high?

This is how I would view it, yield would still go higher as Treasury is still continuing its rebalancing. So when that happen, S&P 500 might trend lower.

I will be looking at 2 other indications to see why this might be so.

Daily Active Options - 18 September 2023

In order for us to understand how S&P 500 will be moving, I have gotten the daily most active options for 18 September 2023, and no surprise.

$S&P 500(.SPX)$ is having the highest number of contracts in terms of index options with a %Puts higher than %Calls by more than 10%.

This mean that market is bearish about the S&P 500, and is expecting its price to trend lower. Or maybe they are expecting more selling from .SPX?

If we also look at $Cboe Volatility Index(VIX)$ it is currently having more Calls than Puts which mean market is expecting volatility to increase.

S&P 500 Moving Averages 50-Day Period

If we look at how S&P 500 is moving on the 50-day period, it break down the 50-day MA period after went above it briefly.

This might tell us that S&P 500 is still weak with 2 days away from the Fed decision. And this is despite the probabilities of 99% that Fed will hold the rate this time.

My personal advice would be to be cautious when trading on S&P 500 as it might not benefit from the good news if Fed decide to skip the rate hike this round.

Summary

Based on what I have gathered and analyze, it seems like S&P 500 will still be pretty weak ahead of the Fed decision on 20 September 2023.

If we look at the options, market is expecting some selling and currently S&P 500 is also below the 50-day MA period.

Do exercise caution if you are planning to look into S&P 500 index.

Appreciate if you could share your thoughts in the comment section whether you think S&P 500 would surprise us once Fed make its decision on rate hike?

@TigerStars @Daily_Discussion @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.