31Jul10:33 amEST

At Least Some of it is Baked in the Cake

Small cap outperformance yesterday combined with a gap higher in AAPL after earnings this morning are helping to blunt some of the "sell the rumor" type of action we saw at the beginning of this week as we head into the FOMC later today. 

Still, one cannot help but think that the widely-publicized rate cut likely to come at 2pm EST today is more than baked in to the market's cake, in terms of how ubiquitous that knowledge seems to be to virtually anyone paying attention to the news flow. But what is not already baked into the cake? What would upset markets? Naturally, the Fed's language associated with the statement is key. If they imply the rate cut is a one-and-done, markets may act out like a spoiled child, as they wanted a steady stream of candy in the form of rate cuts for the foreseeable future. 

As traders, we know this is a known risk event, and one that is featuring what is supposedly a bullish catalyst for stocks but also one that is beyond obvious at this point. That recipe makes me a bit skittish in terms of loading up on longs before the event. To be sure, I am still eyeing quite a few desirable individual names, like GH. 

However, I would rather reserve most of my capital for allocation after we get through this type of context for the FOMC. 

Finally, TWTR's post-earnings action is as bullish as can be. Note the high and tight bull flag on its daily chart, updated below. The stock still has plenty, and I mean plenty, of skeptics, which is fine by me--My theory is that TWTR at this moment in time is not unlike Facebook back in 2013. 

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