The Federal Reserve is poised to activate the money printers this week. 

This week is packed, the S&P 500 at all-time highs, the Fed cutting rates on September 17, and quad witching on September 19. I want to walk you through what matters for your portfolio: the macro backdrop, historical context, and the exact trade setups I am watching. 

Quick snapshot: what’s happening this week

• Fed cut is expected on September 17; the market is pricing in a 100% chance of a cut; the question is 25 bps vs 50 bps.

• Key labor/inflation signals: Recent JOLTS, nonfarm payrolls, and unemployment claims have been weak. PPI month-to-month surprised to the downside (negative). CPI year-over-year printed 2.9% as expected, but CPI month-to-month was hotter by 10 basis points.

• Fed funds rate: currently 425–450 bps (4.25%–4.50%).

• Quad witching: September 19 (options, futures, and options-on-futures expirations) can add intraday volatility.

• S&P status: at or near all-time highs; this shapes historical outcomes after cuts.

Why this cut matters (and why the tone of the Fed’s statement will move markets)

The market is essentially saying the Fed is going to cut. What markets actually do depends on how Powell frames it. If he indicates the cut is precautionary due to weakness in the labor market, it could alarm investors and lead to a brief market downturn. If the cut is gradual and framed as normalizing policy, the move tends to be well-received.

When the Fed cuts slowly, the market usually interprets that as nothing to panic about; when the Fed slams rates to zero, you often see recessionary outcomes.

Important datapoints that moved probabilities recently:

• PPI month-to-month negative helped the case for a cut.

• CPI month-to-month hotter by 10 bps reduced the probability of a 50 bps cut; that probability fell from about 11% to around 3.5% after that print.

Historical patterns: what happens when the Fed cuts at all-time highs?

We’ve actually seen this before. Two key patterns matter:

• If the Fed waits 5–12 months between cuts and then makes a modest cut, the short-term (1–3 month) returns can be negative and volatile. But the next 12 months have historically been strong.

• When the Fed cuts rates while the S&P is within 2% of an all-time high, it can lead to short-term volatility. However, historically, the following year has always resulted in positive returns (20 out of 20 times).

Examples to keep in mind:

• November 6, 2002: A larger-than-expected cut during a battered market resulted in an approximately 15% decline initially, but that marked the bottom, and the market rallied for years afterward.

• September 2024: A surprise jumbo cut (50 bps vs expected 25 bps) led to continued rallies into early 2025 before larger volatility later.

Bottom line: short-term pain plus volatility can create a great asymmetric long-term opportunity. I actually want a pullback (ideally double-digit) so I can load up on high-conviction trades with favorable risk-reward.

Market backdrop and valuation reality

Valuations are historically high. If you buy the S&P at today’s multiples, 10-year annualized returns are likely muted, roughly between -2% and +2% based on historical valuation outcomes. That explains record cash parked in money market funds. Still, that doesn’t preclude multi-month or one-year double-digit returns; bull markets can keep running even from stretched valuations, like in 1998.

Important calendar (this week)

1. Sep 17: FOMC decision -  rate cut expected.

1. Sep 19: Quad witching  -  expirations that can spike intraday volatility.

1. Sep 22: Robinhood officially enters the S&P 500 (that rebalancing/liquidity event matters for the stock).

My favorite short- and mid-term trade setups

These are the names I’m watching closely. For each, I will note the rationale and how I would prefer to enter (or not chase):

• Tesla (TSLA)
  We just saw a major breakout above the equal highs around $367. Price is sitting near $400. My thesis: TSLA can reach all-time highs ($488.54) by year-end. Execution: Do not chase; wait for a pullback that retests the breakout (ideally a retest of the $367 area as support). Resistance levels to watch: $420, $440, then all-time highs.

• Chipotle (CMG)
  Potential deep-value long over the longer term. Was trading near $70, now around $38. There’s structural support/resistance near $35. Right now it is a falling knife. I am interested, but only if it shows support and a clean setup.

• Robinhood (HOOD)
  HOOD’s inclusion in the S&P on Sep 22 is a catalyst.  I am hoping quad witching plus the Fed move create a sell-the-news pullback. If we get a correction, that will be an attractive buy; most stocks that enter the S&P trend higher afterward, especially liquid/hyped names.

• Amazon (AMZN)
  Amazon pulled around 5% in three days (profit-taking). I’m watching whether the identified support holds for a run back to all-time highs. 

• Ethereum (ETH) & BMNR
  ETH has a daily fair value gap overhead. If ETH gets rejected and breaks below recent lows, I’d expect a retest of the $4,000 level. I have been watching BMNR (the ETH fund Tom Lee is associated with in some narratives) as a proxy; it had a 15% move on one day recently, but I won’t chase it. If ETH closes below the fair value gap, expect a deeper pullback and potential swing trade opportunity at lower levels.

The stocks I am bullish on long-term (individual analysis coming soon). 

• Marvel (MRVL)
• SOFI (SOFI)
• UBER (UBER)
• Draft Kings (DKNG)

Trading approach heading into Fed day and quad witching.

If you trade, you want volatility: it creates intraday movement and swing setups. If you invest long-term, volatility allows better entry prices and tighter risk control. My playbook this week:

• Favor patience: don’t chase breakouts without a proper stop.

• Watch for sell-the-news reactions after the Fed; those can produce clean entries.

• Be aware of quad witching noise: it can cause intraday spikes that aren’t real trend changes.

• Manage position size aggressively: we want asymmetric setups (small risk, large potential reward).

Final thoughts

This week is pivotal. Expect headlines and short-term volatility around the Fed and quad witching. Historically, Fed cuts at or near all-time highs often produce short-term pullbacks but strong following-year returns. Personally, I want a meaningful correction so I can deploy capital into asymmetric setups.

Trade plan summary:

• Don’t chase stretched breakouts, wait for clean retests.

• Use quad witching and Fed headlines as potential volatility opportunities, not reasons to panic.

• If you’re long-term, consider building positions on weakness; if you’re trading, manage risk tightly.

What do you think the Fed will do? What trades are you salivating for? Drop your thoughts below: I read them, I respond, and I’ll cover the best ideas in follow-up pieces.

“Plan the Trade and Trade the plan”.