The Setup: Fed Day Anticipation

Today’s FOMC meeting carried significant weight as markets awaited Powell’s decision on interest rates. The pre-announcement period showed typical Fed day behavior - sideways chop as traders positioned themselves for potential volatility. NQ futures hovered around yesterday’s close, showing little directional bias as the 2:00 PM announcement approached.

The calm before the storm gave no indication of the explosive move that would unfold in the session’s final minutes and the after hours.

Powell Speaks, Markets Drop

As Jerome Powell began his press conference following the unchanged rates announcement, NQ futures started to slide. The initial reaction seemed measured, but as Powell continued speaking, selling pressure intensified. The decline accelerated, pushing NQ below yesterday’s low - a critical technical level that triggered stop losses and attracted short sellers.

This breakdown below the previous day’s low created what would become a textbook bear trap. Short sellers, seeing the technical breakdown during a Fed event, piled in expecting further downside. The stage was set for a dramatic reversal.

The After Hours Explosion

With just 15 minutes remaining in the regular session, something remarkable happened. NQ futures suddenly reversed course. What had been steady selling transformed into panic buying as large orders hit the market. The speed and magnitude of the reversal caught many traders off guard.

NQ Bear Trap and All-Time High NQ futures showing the dramatic bear trap below previous day’s low followed by explosive rally to new all-time high at 23,689

The buying continued relentlessly through the close and accelerated in after-hours trading. By the time the dust settled, NQ had not only reclaimed the day’s losses but pushed to a new all-time high of 23,689 - a stunning reversal that left bears trapped and bulls celebrating.

The Microsoft Catalyst

While the Fed meeting set the stage, the real explosive move came after the close when Microsoft reported blockbuster earnings. The tech giant’s cloud computing unit, powered by massive AI demand, delivered results that exceeded even the most optimistic expectations:

  • Revenue: $76.4 billion (beat expectations)
  • Cloud Services Growth: 39% (exceeding estimates)
  • Azure Revenue: Surpassed $75 billion annually
  • Operating Income: $34.3 billion, up 22%
  • EPS: $3.65 per share (beat consensus)

Microsoft’s shares initially surged over 6% in after-hours trading, providing the catalyst for NQ’s continued explosion higher. The company’s AI-driven growth story, particularly through Azure hosting models from Meta, OpenAI, and now Elon Musk’s xAI, reinforced the bull case for technology stocks.

Microsoft Earnings Beat Microsoft’s after-hours surge following blockbuster AI-driven earnings beat

CEO Satya Nadella’s statement that “Cloud and AI is the driving force of business transformation across every industry” resonated with institutional investors who had been waiting for confirmation that the AI boom remains intact despite rate uncertainties.

Institutional Footprints

Several factors point to institutional accumulation during this reversal:

1. Timing of the Move

The explosion occurred in the final 15 minutes - a period when retail traders often close positions but institutions execute large orders. This timing suggests coordinated institutional buying.

2. Volume Surge

The reversal came with a massive volume spike, far exceeding the average for that time of day. This kind of volume typically indicates institutional participation rather than retail trading.

3. After-Hours Continuation

The rally didn’t stop at the close but continued aggressively in after-hours trading. Institutional players have better access to after-hours liquidity, and the continued buying suggests they weren’t done accumulating.

4. Bear Trap Execution

The drop below yesterday’s low triggered stops and attracted shorts, creating liquidity for large buyers. This is a classic institutional tactic - push price to trigger stops, then reverse aggressively to trap the shorts.

Technical Analysis: The Perfect Storm

From a technical perspective, today’s action created several bullish signals:

Failed Breakdown

The break below yesterday’s low that failed to hold is one of the strongest reversal patterns in technical analysis. It shows that sellers couldn’t maintain control at a critical level.

New All-Time High

Breaking to new all-time highs on the same day as a bear trap is exceptionally bullish. It suggests strong underlying demand and limited overhead resistance.

Volume Confirmation

The massive volume on the reversal provides strong confirmation that this wasn’t a low-liquidity squeeze but rather genuine institutional accumulation.

What This Means for Traders

Today’s action provides several important lessons:

  1. Fed Days Remain Treacherous: Even with an “unchanged” decision, Fed days can produce extreme volatility in both directions.

  2. Bear Traps at Key Levels: When price breaks below important support during news events, be alert for potential traps. The combination of stops and new shorts creates fuel for violent reversals.

  3. Institutional Timing: The final 15-30 minutes of regular trading often reveal institutional intentions. Today’s late-session explosion was a clear signal of large buyer presence.

  4. Follow-Through Matters: The after-hours continuation suggests this wasn’t just short covering but potentially the start of a new leg higher.

Looking Forward

With NQ at new all-time highs and clear institutional support, the path of least resistance appears higher. The combination of Fed clarity and Microsoft’s AI growth story creates a powerful bullish narrative. Traders should note:

  • Overbought Conditions: The explosive rally may need consolidation
  • Trapped Shorts: Short covering could provide additional fuel if the rally continues
  • Fed Clarity: With rates unchanged, one uncertainty is removed from the market
  • AI Momentum: Microsoft’s results confirm the AI growth story remains intact
  • Earnings Season: Other tech giants may follow Microsoft’s lead with strong results

Key Takeaways

Today’s Fed meeting will be remembered not for what Powell said, but for what the market did in response. The dramatic bear trap and subsequent all-time high illustrate several crucial points:

  • Institutional players used the Fed event to accumulate aggressively
  • Technical breakdowns during news events can be traps
  • The final minutes of trading often reveal true market intent
  • New all-time highs on heavy volume suggest further upside potential

For day traders, this session reinforces the importance of staying nimble around Fed events and respecting the power of institutional order flow. When the big players decide to move, they can turn apparent breakdowns into explosive breakouts in minutes.

The close at new all-time highs sets up tomorrow’s session with bullish momentum. Will we see follow-through buying, or will the overbought conditions lead to consolidation? One thing is certain - today’s bear trap caught many traders on the wrong side and reminded us why Fed days remain some of the most challenging and rewarding trading sessions of the year.