Special Bulletin: July 30, 2024

Biggest Fed Meeting Ever?

Some are saying that tomorrow’s Fed decision has the potential to be huge. Maybe the biggest meeting ever… at least since the last time it was the biggest. We don’t know about all that, but we do agree that a lot is at stake this week.

Can the Fed cut rates right before an election and not look intentionally biased? No. But do they care this time?

Can the Fed risk waiting until after the election to apply any perceived needed stimulus? Yes, it could wait. Alan Greenspan waited in late 2000 until all the “pregnant ballots” and “hanging chads” were finally dealt with. However, if the Fed waits this time, Wall Street may turn on the Fed in disappointment and punish stocks to ultimately get what they want from the rather reputationally aware Fed we currently have.

We are amid a technically odd market. Strange crosscurrents are taking place. There’s a definite rotation away from big tech happening while small/mid-caps and financials among others have shot into orbit. Depending on what the Fed does/says tomorrow that trade could accelerate or have an ugly about-face.

Last week we wrote, “The next few days will be extremely telling and important for gauging the real interest in stocks by the institutional investors, and thereby the true health of the stock market. Was this the first shot across the bow? At this point we have not seen a “vertical violation” yet, which is good news for the bulls. But a drop to and a test of the major indexes 50-day mav’s could be in store in July/August. Yet, a high volume move back up to all-time highs is still possible and would negate the weakness and be a sign of continued demand (strength) for equities. Make the stock market prove itself.” Indeed, the major indexes did fall to (and even below) their respective 50-day mav’s. Now to see how the institutions respond to that sharp sell-off with the Fed as the catalyst.

Our Current Market Outlook remains “Uptrend Under Pressure” with a yellow light based on our Core Four from today’s close which showed 1 green, 1 yellow and 2 red lights. The VIX has had several successive closes over its 50-day mav and is still well above it (a negative warning).

Last week we also stated, “There is historical evidence that suggests in certain years stock markets can top in August and then experience sharp declines into Sept/Oct. This can only happen if the major indexes undercut their 21 and 50-day mav’s in the weeks ahead. Otherwise, the trend remains your friend. (Emphasis added.) The major indexes have undercut those key mav’s and are holding on to the mav test by a tread. The next 3 days will be crucial.

“Show Me a denarius. Whose likeness and inscription does it have?” They said, “Caesar’s.” And He said to them, then render to Caesar the things that are Caesar’s, and to God the things that are God’s.”  Luke 20:24-25 NASB 1995

Game plan: Be prepared for almost any outcome over the next 3 days. The Fed is sitting on a keg of dynamite. Our outlook remains one full of caution. The Q2 earnings season is proving to be a mixed bag but interestingly with many rotational positive surprises. 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! ®