NASDAQ wants to bounce on relief that the Fed has spoken

NASDAQ did manage to bounce a little after the Fed made its announcement and had its press conference, but it will take a couple of days for the dust to settle and trading to shift back to focusing on the economic and business outlook for the U.S. economy. Technically, the Fed will actually be doing the same, desperately grasping for straws to ascertain how strong or weak the U.S. economic outlook really is for the coming months.

The market will remain exceptionally volatile as people desperately over-parse the Fed's words to read far more into what the Fed said than they actually said or meant. The top dispute is whether the Fed actually meant to imply that there would be two hikes this year. The dot plot indicates uncertainty even on the Fed's part, but people again seek to over-parse what was actually said.

Meanwhile, Fed funds futures actually pulled back a bit, now indicating barely a 56% chance of liftoff in December, only 38% chance for October, and only a 19% chance for September, with a second hike in March, and a third hike to 1.00% in June. This outlook could easily change as the day progresses and nuances of the Fed and economic outlook are analyzed more carefully. My personal outlook remains that October is the most likely time frame for liftoff, but it all depends on whether or not the economy strengthens or weakens over the next four months. The economy should strengthen somewhat, but that strength is somewhat uncertain and somewhat tentative. Stay tuned.

The Fed itself repeatedly said that people are reading too much into the exact time when liftoff occurs, and repeatedly said that the rate of hikes would be slow and gradual. Clearly Fed funds futures got the message.

NASDAQ futures are up moderately at this moment, indicating a moderate bounce at the open, but as always we must caution that futures and the open are frequently not reliable indicators of the trajectory of the market for the rest of the day.

We could see a nice relief recovery bounce today, but we could just as easily see a renewed sell-off as people realize that the sluggish recovery that keeps the Fed at bay also limits the fundamental growth of most companies. The market will try to look past the immediate economic outlook, but only six to nine months out into the future. Meanwhile traders and short-term speculators will be all over the map as they play the news and also play the volatility over the news.

Greece? Still a sideshow focused on intensifying political theater. A deal is still likely, even as the sides talk up the prospect of failure as a negotiating tactic to get the other side to cave. Both sides know that a deal is highly likely and highly desirable, but politically neither side can accept compromise until the eleventh hour when politically it becomes okay to shrug their shoulders and say that they tried. The U.S. stock market may remain wary of a deal, but that's more traders seeking to incite a bit more volatility, rather than a clear bet on the outcome.

NASDAQ remains within striking distance of new highs, which is good, but also adds to the risk that hedge funds could be getting ready to reverse and seek to push the market back down within the wide trading range. Either way, volatility will be the result.

In short, volatility remains king, with equal probabilities for a big up day, a big sell-off, or a modest to moderate rise or fall for the day. Right now, we seem poised for a modest to moderate recovery bounce. The immediate question will be whether people pile on or sell into that rally. Eventually its momentum will peter out sometime today, and then it's back to the hedge funds and whether they wish to push the market higher or reverse and attempt to incite a sell-off.

-- Jack Krupansky