Welcome to Fed Day. I Hope You Get What You Want.
It's the day we've all been waiting for, Fed Day. Will the Fed cut by 25 or 50 bps? And whatever they do, will you be happy?
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Finally! The Fed Cut Day is here.
It’s like being a little kid waiting for Christmas. The date is marked on the calendar, the presents are under the tree and you’ve checked to see which ones have your name on them. Which one do you open first? And will they contain a 25 basis point cut or a 50?
And will you be happy with 25 if you wanted 50? Will you be happy with 50 if you wanted 25? I have one guarantee for you: some folks will be happy, and others will complain.
I can also report that the market has mostly been sloshing around for three trading days already, but we do have seven straight green days for the S&P. Some day that streak needs to end, and it’s more likely to end sooner than later.
But you know what else has a long streak going? The Russell 2000. A week ago I suggested that the QQQs had run into resistance at 470-475 (they have stalled there) and perhaps it was time for IWM to run a bit. It has. But now it has run five straight days, which is not that rare but going to a streak of six is. The last time the Russell did that was in June of 2023.
I have no idea, and I wouldn’t even give odds that Wednesday is up or down but I can tell you that my own Oscillator will be maximum overbought by the end of the day on Friday.
I can also tell you that when I walk the Nasdaq up one thousand points over the next week or so, the Nasdaq Momentum Indicator stops going up and turns south on Thursday of this week.
As a reminder, these indicators are not meant to pinpoint the exact day but to give you a general idea of the time frame. Recall we did this exercise, attempting to find the oversold condition two weeks ago and the market turned up a few days before the indicator did. It can be a few days on either side. It’s a general time frame.
I can also tell you that Tuesday was the first day we saw the number of stocks making new highs not expand. Monday we saw 415 new highs on the NYSE and Tuesday, despite the morning rally, there were 392. Nasdaq had 377 new highs Monday (which I would remind you was a down day for Nasdaq) and on Tuesday had 310 new highs. That’s the first stalling we’ve seen since the rally started a week ago.
The put/call ratio was .79 so there is a lot riding on Chair Powell and his committee’s decision on Wednesday. While the Daily Sentiment Index (DSI) for the VIX hasn’t changed, the VIX itself stayed green again on Tuesday. I maintain that I think the market is due for a bout of volatility next week as we head into the end of the quarter. Then we’ll wait to get oversold again because breadth has been good.
