The market is rallying as investors bet US interest rates won’t go up tonight. They could be disappointed in the event of a hike, the market would decline sharply. People have bought the rumour which is "no hike", this is why the stock market is rallying.
It could also be due to short covering as some people don’t want to be short ahead of the announcement. Of course when people buy the rumour, there is little buying power left when the announcement comes. If tonight’s decision is not to hike, the market will probably rise but not much, upside is limited. In fact I expect this positive news to have the opposite effect, the short covering people will get back into the market at higher levels. So the risks are on the downside. The thinking is if they don’t raise rates now they will do so at the next meeting.
There are people who are for a rate rise, but the economy is too fragile, such a move would frighten investors and in this event the stock market would sell off. Given the low inflation, US CPI is negative, we can’t say the US economy is booming.
Right now the rally is still part of a counter trend move. The trend is down and when this counter trend move is over the FTSE will decline to new lows. The difficulty is finding entry levels because volatility is high. One moment the index is collapsing, the next it’s trading 200 points higher. Two days ago the FTSE touched 6020, today it’s trading near 6260.
If 6284 remains intact we assume that wave iv (circle) is complete If 6284 is broken, it’s not clear what the alternate pattern is, but upside is limited. Wave iv (circle) is unlikely to touch the 61.8% retracement at 6384.