Strong rate cut and doubt

MOTIVATION
Quote of the week

"The balance is fragile: what feels like a small adjustment today could unleash an avalanche tomorrow."
With the Fed adjusting rates and the market navigating historical highs, balance is key.

Week of 16/09/2024
What to know about the week

•  SPY and NASDAQ have their best week of the year: Both indices showed their best performance of 2024 so far, reflecting optimism in the markets.

• The Fed cuts by 0.5%, but the market closes with doubts: Despite a stronger-than-expected cut, the SP500 closed the week in dangerous territory.

• Dow Jones closes at all-time highs (ATH): While the SP500 remains weak, the Dow continues to hit all-time highs.

• Shorts on oil at highs: Investors continue to bet on the decline of oil due to decreased demand.

• Focus on unemployment: The unemployment rate has risen, and while long-term Treasury yields are also increasing, inflation is still not fully under control.

• The Fed's dot plot projects two more cuts of 0.25%: The Fed has made it clear that more cuts are on the horizon.

• September surprises as one of the best months of the year for the SP500: Although historically the worst month, this year seems to be breaking the trend.

• Ambiguous market profile: While the market hits all-time highs, retail prices and housing prices continue to rise, along with an increase in bankruptcies.

• Housing sales fall 2.5% in August compared to the previous month: Housing sales decreased by 4.2% year-over-year.

20/09/2024
Reflection on what happened and what may happen

The Fed gave its push by sharply cutting the rate by 50 basis points, with another 25bp cut expected before the end of the year. (See the Fed's DOT PLOT on my X profile: https://x.com/profitustrader)

There were very doubtful candles in the indices (see below). A long-wicked doji, decreasing volume, and a close below the previous low. It doesn't seem that the next candle will be bullish, but of course, we can't judge the index solely based on the chart; on the other hand, we must consider that the rate cut will fundamentally bring money flow into higher-risk assets.

Historical Perspective

• September, a historically weak month for the SP500: This year, however, it breaks the trend and it seems we will have the best September in five years for the SP500, and the best in eight years for the NASDAQ.

• The Fed's delicate balance: History has shown that aggressive rate cuts, like the ones we are seeing, often bring long-term recession risks. The Fed will need to maneuver carefully.

20/09/2024
Market Lessons

This month serves as a reminder that, although indices may be at all-time highs, the fundamentals of the economy, such as inflation, unemployment, and issues in the real estate sector, remain a challenge.

Common Mistakes

Entering a breakout without volume can be very risky, as the drop can be significant. Sometimes it's better to wait for confirmation, even if it reduces potential gains, and take on less risk.

Economic Calendar week of 23/09/2024

Monday, September 23, 2024

Tuesday, September 24, 2024

Wednesday, September 25, 2024

Thursday, September 26, 2024

Friday, September 27, 2024

Earnings calendar week of 23/09/2024

Tuesday, September 24, 2024

Wednesday, September 25, 2024

Thursday, September 26, 2024

Summary
Summary of the week's summary

This week was marked by the Fed's rate cut of 50 basis points, which pushed the SPY to break new highs. However, there was no significant volume, and there are indecision candles that we will see how they continue into the next week.

Attention
Risk Alert

With the market at all-time highs and shorts on oil, investors should be alert to a possible correction if crude demand suddenly recovers or if rate cuts fail to sustain bullish momentum in stocks. Additionally, inflation and rising bankruptcies could create a more volatile environment in the coming months alongside elections and employment.

Attention
Opportunities Map

The energy market remains a point of interest for investors looking to take advantage of the drop in oil prices. Any change in demand could create opportunities in this sector. Additionally, technology stocks continue to show resilience, with the SP500 and NASDAQ exceeding expectations this September.

Art
Ilustration of the week