COMMENT ON THE FED'S INTEREST RATE CUT (11:00 pm EDT)
Today the Fed announced a generous one-half point cut in interest rates rather than the quarter point cut some were expecting. Not surprisingly, Wall Street responded to this news with a massive surge in equity buying just after the 2 PM announcement. But this bullish euphoria was short-lived as the broad stock market indices fell back sharply over the final two hours of trading, and all three (DOW, S&P 500, NASDAQ) closed the day in negative territory. Some of this fall may have been due to some hawkish rhetoric in Fed Chairman Jerome Powell's post announcement press conference speech in which he emphasized that the Fed is in no hurry to ease policy. He also said that investors should not assume that today's large rate cut means that this will be be the pace moving forward:
“I do not think that anyone should look at this and say, ‘Oh, this is the new pace.’”
“I think we’re going to go carefully meeting by meeting, and make our decisions as we go,” he said.
Of course, our cycle and technical analysis indicated an imminent top and the start of a significant correction down by the end of this week. Did we just see it today? Maybe. But it has to follow through over the next few days. If equities surge back up tomorrow and Friday, we might be seeing a "breakout" instead of a turn down in our current reversal zone (which ends on Friday). I am still holding my short position in the DOW for now.
Today the Fed announced a generous one-half point cut in interest rates rather than the quarter point cut some were expecting. Not surprisingly, Wall Street responded to this news with a massive surge in equity buying just after the 2 PM announcement. But this bullish euphoria was short-lived as the broad stock market indices fell back sharply over the final two hours of trading, and all three (DOW, S&P 500, NASDAQ) closed the day in negative territory. Some of this fall may have been due to some hawkish rhetoric in Fed Chairman Jerome Powell's post announcement press conference speech in which he emphasized that the Fed is in no hurry to ease policy. He also said that investors should not assume that today's large rate cut means that this will be be the pace moving forward:
“I do not think that anyone should look at this and say, ‘Oh, this is the new pace.’”
“I think we’re going to go carefully meeting by meeting, and make our decisions as we go,” he said.
Of course, our cycle and technical analysis indicated an imminent top and the start of a significant correction down by the end of this week. Did we just see it today? Maybe. But it has to follow through over the next few days. If equities surge back up tomorrow and Friday, we might be seeing a "breakout" instead of a turn down in our current reversal zone (which ends on Friday). I am still holding my short position in the DOW for now.
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