Special Bulletin: August 24, 2024

Is the “Powell Put” in?

What is a “put?” Simply stated: a financial instrument intended to limit downside price risk. With his Jackson Hole speech last week, Fed Chairman Jerome Powell appears to have effectively put a “put” in under the stock market in the form of future interest rate cuts in the event of softening corporate earnings (and falling stock prices). Why is the Fed doing it? To “protect” investors?

The stock market appears to have sniffed this out two weeks ago right after the Japanese Yen “carry-trade scare, which proved to have been used as a violent (V3) “shakeout.”

But it is not all sugar and spice and all things nice just yet for the stock market. The major indexes are right back up to prior highs which at least for a short while will act as resistance. Understand that if the big elephants “know something” or are preparing to reduce exposure, this juncture is exactly where it will happen and selling will emerge immediately. It is after all late August and heading into the infamous September/October period.

Our Current Market Outlook remains “Uptrend Under Pressure” with a yellow light as of the close Friday – 08/23/24. Our Core Four has 2 green and 2 yellow lights with a VIX that is testing its 50-day mav and is well below its 21-day mav. The C.M.O. is very near to turning green but is still barely clinging to a cautious yellow signal.

To the major indexes’ credit, they have scored 3 days that could each be defined as a Follow Through Day (FTD) in the past 2 weeks. The confirmed rally also did NOT experience any Distribution Days in the first 3 days after the initial FTD. These are technical positives.

The key indexes are again at important levels of overhead supply (resistance), so a powerful move up through this price area would be bullish. However, the rally in August has been on awfully low volume thus far and is still suspect.

A “put” doesn’t shield an investor from losing money. It just means that the amount at risk is theoretically less. Perhaps the put is intended to protect Powell’s own position? We will know in short order.

“But the Lord is faithful, and He will strengthen and protect you from the evil one.”  2 Thessalonians 3:3 NASB 1995

Game plan: Do not let your guard down despite the “Powell put.” Demand that the key indexes stay over their 50-day mav’s or take action to reduce exposure if they fail there. Prepare an exit strategy in case “the bears” assert themselves one more time before going into winter hibernation. Ask Jesus for wisdom. Please pray for the peace of Jerusalem (Psalm 122:6-7). May they prosper who love her.

Note: You can learn more about The Triumphant Core Four risk management system by clicking here.

Have a Triumphant day! ®