50 BPS Interest Rate Cut Now All But Impossible
While odds favor a significant cut by the end of the year, don't be surprised if the FOMC punts into early 2025.
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Earlier this week, I talked about how the Invesco QQQ Trust QQQ reached a point where the rubber met the road. While I expected some resolution, I did not expect the bulls to push the pedal to the floor, burn the tires on the road, and leave bears in a cloud of smoke.
Bulls smashed through the 10-day and 21-day exponential moving averages (EMAs). The good news is that the bear flag setup is dead. The bad news is that QQQ and hundreds of stocks have bounced so far and so fast that it is too late to chase in the short term. Adding to the challenge is that momentum is so strong that shorting is even scarier. Some of the most intelligent investors and traders I follow echo this sentiment.
Remember, the market can remain irrational longer than you can stay solvent.
Currently, you can throw a dart at the large-cap market names, especially in tech, and you will likely find a chart breaking out. It’s been some time since I remember looking at or writing about V-shaped bounces. Admittedly, they are some of the hardest to trade for disciplined traders.
The markets were hit with a ton of data on Thursday, one of the longest lists of reports I can remember in quite some time. Overall, the reports were mixed, not clearly indicating strength or weakness. The Core CPI and Core PPI from earlier in the week aligned with expectations.
A September cut remains on the table, but the possibility of a 50 basis point cut, as unrealistic as I believed it to be before this week, seems nearly impossible now. Odds favor a 50 basis point cut for the remainder of the year, but I won’t be shocked if the FOMC punts a cut into early 2025 especially if inflation remains in line or slightly higher than expectations.
At the time of publication, Byrne had no positions in any securities mentioned.
