Jerome Powell And The Fed Take A Victory Lap As The Market Hits New Highs

Market Update September 19, 2024

The Markets

Jerome Powell and the Federal Reserve gave the market what it wanted yesterday with a 0.50% rate cut.

The reactions were strong across the board, sending stocks higher. However, traders were quick to take profits, driving prices down and leaving some charts looking vulnerable at the close. So, to answer yesterday’s question, “Is a 50 bps cut already priced in?”

Yes it was, at least in the short term.

The follow-up to that, though, is that it’s not the rate cuts that matter. And it’s not the reaction either. It’s the reaction to the reaction that is most important. Dizzy yet?

All kidding aside, these false starts and sharp directional changes are common on Fed Day. Search “Fed” on the list of posts here at Trading Adventures, and you will quickly see that a quick “up and down” move is something we’ve seen many times following an interest rate announcement.

Moving beyond the kneejerk reaction, today’s price action and the subsequent closing prices carry much more weight. Let’s take a look at the charts.

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The Charts

SPY made a new all-time high on heavy volume today by gapping up from yesterday’s close by more than 1.5% at today’s open. It then traded in a range and closed back near the start. The Bollinger Bands are pushing higher while RSI has yet to reach ‘overbought’ status. The uptrend continues.

QQQ pushed beyond the August 22 pivot high at $485.54 for a time before closing back below. Solid action, though the Bollinger Bands are still flat. All of the key moving averages are supporting price below and in the most bullish order - 8/21/50/100/200. Short-term uptrend while the longer term is still TBD.

IWM spent most of the day up in yesterday’s reversal range, negating the potential reversal candle. $226-$227 is the next level to get and stay above. However, the degree of extension beyond the short-term moving averages suggests that we will see some consolidation before that happens. Short-term uptrend while the longer term is still TBD.

DIA gapped up to make new all-time highs, like SPY. Its 8-day MA is closely behind, and RSI is not in overbought territory. Uptrend.

TLT is looking for support at its 21-day MA after the mild pullback from the 12/3/2021 pivot high anchored VWAP. Mild pullback in an uptrend.

DXY Notable action in US dollar futures this week as they push the limits of the Dec. 2023 pivot low. Moving further below this level would put it in new territory and should provide a considerable tailwind for stock and stock indexes moving higher. Downtrend.

BTCUSD We’ve been watching the $58,500 level in Bitcoin closely for a couple of weeks now, and it’s finally been able to move well beyond there in the textbook fashion of a — 1. breakout, 2. retest, and 3. continuation move.

Now bumping into the 200-day MA, it will likely need to recompose itself before climbing beyond that and the ~$65,000 pivot level, if it can do so at all. Short-term uptrend. Medium and long-term TBD.

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The Trade

Warning: stock market cliché and quote incoming!

The trend is your friend.

And from the late Jon Boorman,

“Buy uptrends and manage risk.”

Ok, one more,

“Only price pays.”

Clichés keep popping up because they are true.

There is always news, the Fed, earnings, politics, war, etc. Never is there a shortage of reasons to be concerned or even scared. But, if we follow the charts and focus on price, we can stay involved in the moves that matter.

With yesterday’s closing action looking suspect on many charts, others held up better. AMZN, PYPL, META, XLB, and others were highlighted on X yesterday. Today, 3 out of 4 are breaking out.

Relative strength is a very useful tool. Focus on the leaders and finding favorable entries with solid reward/risk relationships.

Keep an eye on my X feed if you need ideas for your watch list.

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The Disclosures

***This is NOT financial advice. This is NOT a recommendation to buy, sell, or trade any security. The content presented here is intended for educational purposes only.

Andrew Moss is an associated member of T3 Trading Group, LLC (“T3TG”), an SEC-registered broker/dealer and member of FINRA/SIPC. All trades placed by Mr. Moss are done through T3TG.

Statements in this article represent that person’s opinions only and do not necessarily reflect those of T3TG or any other person associated with T3TG.   

Mr. Moss may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed. This may reflect the financial or other circumstances of the individual, or it may reflect some other consideration. Readers of this article should consider this when evaluating the information provided or the opinions being expressed.

All investments are subject to the risk of loss, which you should consider in making any investment decisions. Readers of this article should consult with their financial advisors, attorneys, accountants, or other qualified investors before making any investment decision.   

POSITION DISCLOSURE

September 19, 2024, 4:00 PM

Long:  XBI0920C105

Short:  

Options symbols are denoted as follows:

Ticker, Date, Call/Put, Strike Price

Example: VXX1218C30 = VXX 12/18 Call with a $30 strike