The trap always looks the same before it springs.

Rates haven’t even been cut yet, but the market’s already decided the Fed is going soft. 

The crowd is leaning in heavily, positioning like they’re reading from tomorrow’s script.

Except they’re not.

All we got last week was one cooler-than-expected CPI print. 

That’s it — one report whose numbers predate the government shutdown, which is on its 27th day, as of this writing, and has held up all kinds of economic data releases during that almost-monthlong gridlock. 

But that was enough to send traders scrambling to chase tech, pile into calls, and dump volatility like risk doesn’t exist.

And now here we are: the day before one of the most important Fed meetings of the year…and the whole market is priced like Chair Jerome Powell’s about to hand out rate cuts and hot cocoa.

Consensus out there is the Fed will deliver another quarter-point cut like it did at the end of last month’s Federal Open Market Committee meeting. 

While that might come true, do yourself a favor and keep these things in mind.

Just Hang on a Second

The economy’s still running hot and core inflation is still above its 2% target. And the Fed’s made it clear they’re not declaring victory based on one headline number that’s probably missing plenty of valuable context.

The gap between what traders hope for and what Powell’s likely to deliver is getting wide. And when that happens, things are more likely to snap.

That’s where the opportunity is right now. 

It’s not in trying to guess what Powell will say but in taking the other side of all the overconfidence being priced in before he says anything.

Look at what’s happening across the board. Volatility has collapsed, the VIX is under 18, and the S&P just notched its third straight weekly gain. 

Meanwhile, tech is ripping and calls are getting scooped up like candy.

It’s a setup I’ve seen play out over and over across more than two decades on Wall Street: The market runs hot, expectations get stretched, and all it takes is one cautious tone from the Fed to yank the rug out from under the momentum.

Earnings Frenzy, Too

And this week, there’s an extra wrinkle: Magnificent Seven earnings.

You’ve got Microsoft, Alphabet, Amazon, Meta — all reporting in the same window as the Fed. Traders are already giddy from last week’s rally, and now the biggest names in the market are throwing gas on the fire.

That means the risk isn’t just that Powell talks down expectations. It’s that the Fed comes out neutral, one of the Big Seven misses, and suddenly all the optimism built into the market this week gets unwound in a hurry.

You don’t need a disaster. You just need a reality check.

That’s the setup I’m trading into tomorrow.

I’m looking at short-dated defined-risk trades on the major indexes. Plus, implied volatility is cheap. That enables me to look for a pullback or a pause without paying for protection.

If we see another strong open tomorrow morning, I’ll be fading it, and not because I’m bearish long-term or because I think the Fed’s going to surprise anyone. 

It’s because the market has already done the thing that gets people hurt: It’s run with the best-case scenario before it even happens.

That’s a rookie move, and this is where experience pays.

Instead of chasing calls or ignoring risk, I’m waiting for the reaction and planning to take the other side of the overreaction.

In other words, right now, the trap is set.

Let’s wait for it to snap.

Stay street smart,
Jeff Zananiri

P.S. Ever bank a thousand bucks in the time it takes to grab lunch?*

It’s not a stretch. Today at noon ET, Aaron Hunziker is showing how he uses a high-speed strategy built to move fast and hit hard.

No overthinking involved. You’re in, out, and done — sometimes in minutes.

Seats are tight, so lock yours in before they’re gone.

*Past performance does not indicate future results. Not typical