A Hilsenrath Rally Heading Into Wednesday's Federal Reserve Meeting

It is not as if the market needs any reason to rally on a particular day. This long-standing bull market has reinforced the the "buy the dip" mentally and dramatic turnarounds or rallies out of the blue are a commonplace event.

News Moves The Markets In Both Directions

However, on some occasions there is a specific news event or comments that can have a dramatic effect on the market. For example, news of Russian troops invading the Ukraine a few weeks ago instigated a steep intraday decline; the market has since recovered.

The market was recovering on its own Tuesday, when comments on the upcoming Federal Reserve meeting from John Hilsenrath sent the market into orbit. There were other factors that contributed to the rally, however, such as index's forming support in a similar area for the third day in a row.

Related Link: JPMorgan Chase & Co., Other Financial Stocks Strong During Market Retreat

Nevertheless, it's hard to dispute that Hilsenrath's comments did not have a profound impact on the market. From 11:30 a.m. to 12:30 p.m. EST, the Dow added another 70 points on top of its 30-point gain it had garnered in the first two hours of trading.

This price action coincides exactly with the time the Hilsenrath webcast hit the Street with his dovish comments on Wednesday's Fed meeting. The rally received another boost when his comments from the webcast were published around 1:00 p.m.

Prediction On The Federal Reserve Bank's Actions

His prediction is that the Federal Reserve may keep the words "considerable time" in the policy statement, but will qualify them. The Wall Street Journal's chief economic correspondent believes that broad statement will be qualified by the Federal Reserve when its statement is released.

In his opinion, the central bank has backed themselves into a corner with their previous statements that its monthly purchases of bonds will end in October.

"Given the economic backdrop, they don't want to send a signal right now that rate increases are imminent," Hilsenrath said. "I think what they do, at the end of the day, is they qualify it."

Furthermore, he expects the Fed to emphasize that its bond program exit strategy is more data dependent than time dependent. In other words, they do want to be locked-in to a specific time table or that a rate-hike is imminent. The Fed does not want to roil the markets with the double whammy of announcing their exit strategy while changing guidance at the same time.

Hilsenrath added, "It's why I think, on the guidance front, they qualify and leave the hard decisions off for another day."

This is something Ben Bernanke handled brilliantly during his tenure, despite one misstep when he initially introduced the prospect of tapering in May 2013. The markets are still waiting for his predecessor, Janet Yellen, to master the daunting task of "Fedspeak."

How Will The Market React

With a monster rally taking place one day ahead of the Fed meeting, the Fed's predicted actions may or may not be already baked in the market. Therefore, a rally off the actual comments may be muted. As the market approaches all-time highs, it will depend if the sellers that were present earlier in the month are still willing to take chips off the table ahead of Friday's quadruple with event.

On other hand other, if the Fed does not follow Hilsenrath's script and insists on ending its bond purchases in October, look out. The fear of rising interest rates sooner than later could ravage the market and erase all of Tuesday's gains.