Fed holds - Market tanks big time. Lower 25 basis points - Already priced in, market tanks. Lower 50 bps - Economy is worse than thought, market tanks. I'd better plan on the market going up next week.
The only one I am certain of is "FED holds market tanks." You can be sure of that. The other two, not clear, but lowers 50 basis points would probably send SPX to 1600 in no time. The most complex one by far is lower .25 because it is what 90% of the market expects, which means the market is on it's own. But what about, lower the FFs rate .25, AND lower the discount window by .25? No one is counting on that one, and it would be in some sense the most surprising. nitro
There are too many calls versus puts driving this market higher the last week, see: put/call ratios. Seasonality for the second half of September is the most negative of the year. I suspect that no matter what happens, since the Fed announcement is during an options ex week, we should get some pretty sizable selling. Remember the goal of market makers is to make the side with the most options expire worthless. And believe me, these firms have the money and clout to do it, again and again.
You have no idea what you're talking about. The goal of options market making firms is to collect the bid/ask spread while minimizing risk within reason. Their only directional bias is the one that generates the most business.