Hike Or No Hike

If you have listened to all the talking heads speaking about the possibility of a rate hike from the upcoming FOMC meeting, you might have walked away thinking the rate hike from the FED is a foregone conclusion. After next Wednesday, it will be a foregone conclusion on whether the FED did or did not hike the interest rate. But in the meantime, here are some charts for you to muddle a bit and see if indeed it is a foregone conclusion that the rate hike is imminent.

First and foremost is the equities market. The SP500 ETF, SPY daily price chart is showing signs it could be pulling back to the September pivot level in anticipation for a potential rate hike.

SPY:

(click on the chart to enlarge)



Similarly for the tech heavy Nasdaq market, the Nasdaq 100 ETF, QQQ also showing signs of a pullback toward the September pivot high near 108.88 level.

QQQ:




These potential pullbacks do not mean the FED won't hike rate. To the contrary, it could be in anticipation of a stronger dollar as the result from a rate hike. A strong US dollar could adversely affect the multi-national companies' earnings since these companies derive a fair amount of their sales from foreign markets.

AAPL is one of those technology company that relies on international sales to fuel its growth, and that growth could be affected if the US dollar continues to strengthen due to FED rate hike. In anticipating the potential effect of the rate hike, AAPL stock price could pull back toward 111 level as the market trying to price in the rate hike.

AAPL:




CSCO is another technology company that depends on international sales and the market is also trying to price in the impact from the potential rate hike.

CSCO:




To monitor what impact or how the market might interpret the rate hike for the technology section, one can watch the XLK, an ETF for the technology sector. One would watch if the price of this ETF can hold support near current level, if it can't then there is a possibility it could pull back to a lower level near 40.86.

XLK:




Now here is the part one might ask, "Are you sure the FED will hike rate next Wednesday?"

One of the sector that will benefit from a rate hike is the financial & banking sector. Here are two bank ETF, KRE and KBE. Both of them show they have been pulling back recently and possibly heading lower. If the market is certain a rate hike is imminent, then one would expect the price of these ETF should have been rising instead of falling.

KRE:




KBE:




And here are the charts for WFC, BAC and JPM, the price for these bank stocks has been falling recently instead of rising and they could be heading lower.

WFC:




BAC:




JPM:




Here is the ETF for the financial sector, XLF. It is also showing signs of a potential pull back.

XLF:




There it is, the market showing signs it is attempting to price in the affect of a rate hike for the multi-national companies, and in other area it is showing signs that the rate hike might not happen next week. As always, the market never make it easy for the participants to anticipate what might happen, that's why one should always trade price not news or hearsay. At the end of the day, it is how the US dollar behaves whether there will be a hike or no hike on the interest rate next week. Watch the dollar!