Polcari: Market Is Betting Fed Does Nothing Today

• Kenny Polcari commented in his daily e-mail that the "Federal Reserve Is Expected To Do Nothing" during Thursday's meeting.
• Polcari noted investors and traders were not "anxious" during Wednesday's trading session.
• Polcari suggested that "bad news is good news again."

Kenny Polcari, a CNBC contributor and NYSE floor trader, stated in his daily e-mail commentary that investors and traders are not "anxious" heading into a Fed decision, as evidenced by Wednesday's trading action.

Polcari pointed out that during Wednesday's market on close (MOC), the sell imbalance rose to more than $1 billion after early indications indicated a $150 million sell imbalance. Typically, when investors and traders see a large sell imbalance it causes a "reaction" and in the final trading moments (especially just one day before a major Fed decision), the reaction should have put some pressure on the market and make traders and investors "anxious."

Related Link: Fed Watch: It's Judgment Day

Howeer, according to Polcari, traders and investors were "holding firm" during the final moments of trading on Wednesday despite a "huge" sell imbalance.

"What you saw was the buyers holding firm, not allowing themselves to be bullied and in fact pushed prices higher into the bell closing the market just a hair below the intraday high," Polcari wrote. "And THAT says a whole lot about expectations."

Bad News Is Good News Again

Polcari also noted that the market's strength over the past two weeks is "inversely proportional" to the economic weakness that has been reported in macro data. As such, this suggests that the market is not expecting a rate hike to be announced on Thursday.

"Bad news is good news again," the trading pro added.

Recent macro data showed the CPI fell 0.1 percent, confirming that recent declines in oil prices has been "great" for consumers but has put the economy in a "downward dog" position. Accordingly, speculators believe that the Fed is "not likely" to raise rates at a time "when the economy is fighting this dog."

"Is the action of late a "buy the rumor, sell the fact" type of event?," Polcari questioned. "Has the mkt moved forward on the 'rumor' that the FED does nothing?"

Finally, Polcari argued if the Fed does nothing on Thursday, traders who already made this bet will look to sell their position to "take advantage of the action" as the Fed will "hide behind the recent global unrest as a reason to delay any hike." On the other hand, if the Fed hikes rates, "look for a swift and painful blood bath."