July 31, 2019
By Mish Schneider
Although they see "sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2% objective,” they go on to say, “uncertainties about this outlook remain."
The market was disappointed it did not get a ½% cut.
The bonds or TLTs soared, which pushed yields down almost 5 basis points.
The dollar gained in strength.
More importantly, the Fed’s move today brings into question whether they will cut again as they head into the September meeting on the 18th.
If their goal is to keep up with what the other Central Banks are doing, one can assume the answer is yes.
The last time rates were cut was in 2008. And we all know what happened to the market then.
With today’s cut and anticipation of future cuts, are the banks playing with the devil?
On the guitar it says “El Alma Es Eterna.” That means, the soul is eternal.
With that said, what we have wondered all along, is will the soul of the bullish market remain eternal, but also, have the banks sold the soul of the market to the devil?
In Europe, one can argue, they already have. With negative rates, what tools are left to use to avoid a potentially deeper recession.
And that’s the good news. If the Fed joins the rest of the world in continuing to cut interest rates, we are still looking at a staflation potential.
Currently, with the U.S. dollar strong, that seems less likely.
Yet, I list five factors already in place to suggest that thinking that way is not so crazy.
Bottom line is that August has had some historically huge selloffs. And since the market’s solvency has been mainly due to dovish monetary policy and corporate buybacks, this might be a really good time to check your stock holdings, trim the fat, reduce exposure, and go enjoy some down time.
Russell 2000 (IWM) As spectacular as the move up was, it was paralleled by an equally spectacular move down today. 155.74 now the immediate support to hold and over 158, perhaps new life.
Dow (DIA) 270.50 now resistance and 264.60 next support or the 50-DMA
Nasdaq (QQQ) 186.50 the 50 DMA support and back above 193.35 better
KRE (Regional Banks) 56.75 next point of resistance with 54.62 key support
SMH (Semiconductors) 116 support with immediate resistance at 119.
IYT (Transportation) 192.45 is the pivotal 10 DMA for tomorrow
IBB (Biotechnology) Confirmed recuperation phase. 105.56 the 50-DMA pivotal.
XRT (Retail) 43.12 is my number to clear. 42.10 key to hold
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