This afternoon at two, the Federal Reserve will announce their latest interest rate decision and will follow that with a press conference at 2:30. These events are notorious for causing volatility in the markets, and this time might be even more volatile than normal. That is because there is some indecision in the market as too what the Fed will do going forward.

There are two things at play. One is the ultimate high water mark that rates will rise to, and the other is the path the Fed will take to get there.

Currently, the market is pricing in an 82% chance of a .75 point hike and an 18% chance of a 1 percent hike. Powell has already shown he is loath to surprise the markets, so at least a .75 point hike is all but assured. The market might not respond much from the rate hike, since that is largely priced in. But Powell will give a press conference at 2:30 where he will be peppered with questions on what the future will bring. If he sounds exceptionally hawkish, his reading of the future could very well cause the market to expect more rate hikes than it has already priced in, and the market could continue its downward spiral.

Yesterday, we said this in Basecamp, and it bears repeating:

The Dow is right back at the recent lows again. At the moment I'd say we're in a perfect position to be going into the Fed rate hike tomorrow.

Scenario A - The market takes off higher after the announcement. We will already be prepared to jump on chart setups we like, so we'll buy into the rally, and because the market is starting off from such a low level, we'll be close to good stops. i.e. we'll be buying low, so we have low risk, high reward.

Scenario B - The market tanks. In which case, we continue to sit on our hands and wait for the June lows to get busted.

Scenario C - The market doesn't move. We continue to sit on our hands and wait for the market to give us some signals.

Today we will be scouring the markets for good potential setups, so we can pounce if the market responds favorably. We’ll be updating throughout the day in Basecamp.