BROAD STOCK MARKET UPDATE and COMMENT ON TOMORROW'S FOMC MEETING (11:30 pm EDT)
The Fed's two-day FOMC meeting concludes on Wednesday (tomorrow) at the usual time of 2 pm EDT. Most analysts are predicting that the Fed will leave interest rates unchanged; however, close attention will be paid to Fed Chairman Jerome Powell's post-meeting press conference for clues as to when the Fed will make any rate cuts this year. Most investors are anticipating 2-3 cuts in 2025, with the first likely in June, but the Fed has made it clear that their plans can change based on constantly shifting economic data. If Powell's post-meeting rhetoric is hawkish, an already nervous equity market could fall further. A more dovish tone reinforcing the idea of more cuts could give the markets a bullish thrust.
In terms of our cycle analysis, this market has already turned bearish. As I described in my last blog, the DOW, S&P 500, and NASDAQ most likely began new medium-term cycles with their lows on Jan. 13. Because all three indices have now fallen well below those lows, the cycles are now technically bearish and should fall lower for at least 6 more weeks. (There's a small possibility that last week's deep lows were the final bottoms to older medium-term cycles - ones that started back on Nov.4. In that case, the cycle trend would still be bearish, but last week's lows would be the start of a new medium-term cycles, and a strong rally could be imminent.)
If we stick with the idea of new cycles starting on Jan. 13, a significant sub-cycle low is now due, and last week's lows are a good candidate - especially since they happened near the center of a strong reversal zone (March 3 - 18). A three to eight day rally could follow before this market turns down again, or we could get a longer rally (1-3 weeks) before the market turns back down. Tomorrow's FOMC meeting may have an influence on how this plays out. I am being very cautious now with my trading strategy. I may try and sell short the top of any significant rally that doesn't exceed the highs from Jan./Feb. If this top is missed, however, we may have to wait several more weeks for another short-selling opportunity. I am still on the sidelines of the broad stock market.
The Fed's two-day FOMC meeting concludes on Wednesday (tomorrow) at the usual time of 2 pm EDT. Most analysts are predicting that the Fed will leave interest rates unchanged; however, close attention will be paid to Fed Chairman Jerome Powell's post-meeting press conference for clues as to when the Fed will make any rate cuts this year. Most investors are anticipating 2-3 cuts in 2025, with the first likely in June, but the Fed has made it clear that their plans can change based on constantly shifting economic data. If Powell's post-meeting rhetoric is hawkish, an already nervous equity market could fall further. A more dovish tone reinforcing the idea of more cuts could give the markets a bullish thrust.
In terms of our cycle analysis, this market has already turned bearish. As I described in my last blog, the DOW, S&P 500, and NASDAQ most likely began new medium-term cycles with their lows on Jan. 13. Because all three indices have now fallen well below those lows, the cycles are now technically bearish and should fall lower for at least 6 more weeks. (There's a small possibility that last week's deep lows were the final bottoms to older medium-term cycles - ones that started back on Nov.4. In that case, the cycle trend would still be bearish, but last week's lows would be the start of a new medium-term cycles, and a strong rally could be imminent.)
If we stick with the idea of new cycles starting on Jan. 13, a significant sub-cycle low is now due, and last week's lows are a good candidate - especially since they happened near the center of a strong reversal zone (March 3 - 18). A three to eight day rally could follow before this market turns down again, or we could get a longer rally (1-3 weeks) before the market turns back down. Tomorrow's FOMC meeting may have an influence on how this plays out. I am being very cautious now with my trading strategy. I may try and sell short the top of any significant rally that doesn't exceed the highs from Jan./Feb. If this top is missed, however, we may have to wait several more weeks for another short-selling opportunity. I am still on the sidelines of the broad stock market.
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