At 2:00pm on September 18th (tomorrow), the Fed will be announcing their Fed rate decision. 70% of the analysts believe the Fed will cut by 50 points.
A cut by 50 points would normally be a stimulant for the market as it means that interest rates are coming down and likely in a strong way and that means more money available for buying products and for producing products at a lower cost. Nonetheless, inflation could be stimulated if interest rates come down too much.
Either way, I believe that no matter what the Fed does tomorrow, the market will come down. Anticipation of a 50 point rate cut has been the case since the inflation report last week, given that inflation has been coming down all this year. Since that report, the DOW has rallied 1850 points in 1 week and most (if not all) of the anticipation has already been factored in.
In addition, the DOW has rallied more than the NASDAQ 100 and that is not what happens in a bull scenario. The DOW represents "safe" stocks and the NASDAQ represents speculative stocks and when the latter underperforms, it usually means that the traders are not speculating on higher stock prices.
More importantly, September is the worst month of the year seasonally and right now, the DOW is slightly above last month's close and the SPX is slightly below last month's close. The August closes (in the DOW that was at 41563 and the index closed today at 41603 and in the SPX, it was at 5648 and it closed today at 5632) and the "average" move down in September is 2,8%, meaning the DOW should get down to 40000 and the SPX down to 5450 by the end of the month in 12 days.
I did short IBM this morning at 218.72 and it closed at 214.13.
I think that the Fed will only cut by 25 points and that could make things worse. Either way, I expect a down market the rest of the month.
A cut by 50 points would normally be a stimulant for the market as it means that interest rates are coming down and likely in a strong way and that means more money available for buying products and for producing products at a lower cost. Nonetheless, inflation could be stimulated if interest rates come down too much.
Either way, I believe that no matter what the Fed does tomorrow, the market will come down. Anticipation of a 50 point rate cut has been the case since the inflation report last week, given that inflation has been coming down all this year. Since that report, the DOW has rallied 1850 points in 1 week and most (if not all) of the anticipation has already been factored in.
In addition, the DOW has rallied more than the NASDAQ 100 and that is not what happens in a bull scenario. The DOW represents "safe" stocks and the NASDAQ represents speculative stocks and when the latter underperforms, it usually means that the traders are not speculating on higher stock prices.
More importantly, September is the worst month of the year seasonally and right now, the DOW is slightly above last month's close and the SPX is slightly below last month's close. The August closes (in the DOW that was at 41563 and the index closed today at 41603 and in the SPX, it was at 5648 and it closed today at 5632) and the "average" move down in September is 2,8%, meaning the DOW should get down to 40000 and the SPX down to 5450 by the end of the month in 12 days.
I did short IBM this morning at 218.72 and it closed at 214.13.
I think that the Fed will only cut by 25 points and that could make things worse. Either way, I expect a down market the rest of the month.
