What A Difference a Week Makes- Rate Cuts are Here

What a Difference a Week Makes in the Market

This time last week, things were looking bleak in the market. Bears were in control, and investors were wondering if the end of this bull run was near. It felt like the market could unravel at any moment. The pessimism was palpable.

The much anticipated rate cut is finally here. Does this mean we aren’t just moments away from the most important CPI report of our lives? Will the market finally stop watching each job report like our financial future depends on it?

Lets not get too far ahead of ourselves. I have lots to cover this week, lets jump in.

Fast forward to this week, look at the heatmap from this Friday and last Friday. I posted this to our discord.

But if there’s one thing you learn in trading, it’s that the market loves to surprise us. Wednesday things looked pretty rough in the morning, but by the afternoon, the major indexes—SPY, QQQ, and IWM—had formed a strong hammer pattern. That shift sparked a rally that took off like a rocket.

With a potential Fed rate cut on the horizon, I want to be bullish, but I’m still cautious. The CME FedWatch tool shows a 50-50 split between a 0.25% or 0.50% cut.

No one knows for sure, my bet is on a conservative 0.25% cut, this strength in the market makes me feel like the market is expecting a cut of 0.50%.

Powell has been cautious with his easing so far, and though the labor market looks weak, a smaller more conservative approach fits his style in my opinion.

The market is pricing in perfection. That makes me cautious here. Of course we can rip higher, so small swings make sense to me.

Yet, despite the bullish market setup, there's one thing that makes me pause: gold. It’s hitting all-time highs too. If you’ve been following my newsletters, you’ll know how much I value technical analysis. Remember the doji pattern I highlighted last week? It’s playing out perfectly.

If you played this doji congratulations my friend!

So where do we go from here? That’s what I’ll be diving into today as I review the major indexes, upcoming dividends, and economic news for the upcoming. But before I jump into the weekly breakdown, I need to let you in on something important.

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Quote for Thought:

"The way I see it, day traders considered themselves successful if they bought a stock at $10 and sold it at $11, bought it back the next week at $24 and sold it at $25, and bought it a week later at $39, and sold at $40.

If you can’t see the flaw in this—that the trader made $3 in a stock that appreciated by $30—you probably shouldn’t read this book."

— Howard Marks

SPY: Bullish doesn’t quite describe this week’s powerful candle, we’re .5% off all time highs. I see people saying is this a triple top. My only concern here is if the market is getting to far ahead of itself rate cut wise. What’s the risk to reward here. We have an election, we have possible recession talk, the market is pricing in perfection.

QQQ: Tech has experienced a bit of a sell off but had a nice rebound this week. We’re really close to breaking the trendline (especially if you don’t use the wicks). Just like I mentioned with SPY the market is pricing in perfection.

IWM: What I hope to see if the small caps benefit from this rate cut. It’s been a tough go, and the downward trend line is obvious. Lets look for another pop after the cut. I know it’s too obvious almost.

GLD: this is the biggest concern I think stock bulls should pay attention to. Gold is a flight to safety. It’s where people go when a recession is coming. I’m in bullish on gold based on the doji I showed you last week. I hope you are too, even if this is a warning sign.

TLT: As interest rates get cut, bonds go up. Again this is so obvious that I don’t know how else to say it. Needless to say I’m in and bullish on TLT.

VIX: There is an inverse between VIX and Equites. VIX down, stocks up… Do you know VIX is the only mean reverting underlying? We talk about it for stocks and moving averages, but VIX is the real mean reverter.

SPYD- I’m known as a dividend guy… Do you want my dividend watchlists? Even if you want to invest in dividend ETFs. My inner circle has access. I’ve been in this for months. 

Upcoming Dividends

I’m in KO and ALB. The charts are night and day 😊

Dividend Aristocrats

Dividend Kings

Week Ahead

Wednesday is the focus as we get a rate cut.

Also reminder this Friday is triple witching with a lot of options expiring!

That’s all for this week. Earnings I’m watching GIS and FDX. I’m actually in both positions. I want to go slow until after Wednesday. We need to see what the market is going to do.

I’ll see you next week. Much Sooner in our discord!