The Fed Hiked and Bonds Rallied

The Fed hiked and Warsh wouldn't say he's done. Unanimous, a quarter point to 3.75-4.00%, the first hike since July 2023. Sixteen of 18 officials have at least one more pencilled in for this year, and when he got asked about the next move he said he's "not in the forward guidance business." The Dow finished down more than 600. SPX closed 7,551.81, down 0.45%. Premarket 7,650, up 98.

The bond market is the surprise. The ten-year pushed back over 5% on the decision, and this morning it's under 5% again and down for the first time in nine sessions, the two-year with it. If the long end had sold off after a hike, that would have meant supply, which the Fed can't fix. Yields fell instead, on a press conference more hawkish than stocks wanted and a 12-0 vote from a committee that split 9-3 in July. Crude's lower too, with the Saudis working to get half the East-West line back within days.

Price is sitting right on 7,650, the one negative strike anywhere near it at -603. Everything else from 7,550 to 7,800 is positive, so I'm treating 7,650 as a pocket. With positive gamma this broad, dealers are selling rips and buying dips, and a 98-point gap into that usually gets chewed back. Most of the size is below us. 7,600 to 7,645 carries +11,524 and the call wall at 7,600 is the biggest node on the day, with prior demand 7,598 on it. Above price it's +6,528, nearly all of it before 7,700. The flip is a band, 7,545 up to 7,595.

The lean is long, just not at 7,650. The buy is 7,631 on a pullback, and 7,662 then 7,677 are for selling into. A close under 7,598 loses the call wall and turns the lean short, next stop 7,548.