Thursday, March 21, 2024

SPX and BKX: The Federal Unnerve

On Wednesday, the market rallied like crazy after the Fed announced that it was going to cut interest rates by (to quote Fed Chairman Jape Owl) "over 9000."  In light of this shocking news, a blistering rally was the only logical response, since a rate cut of that magnitude would, of course, cure cancer, end death, and lead to the Earth maintaining a constant year-round temperature of 72-degrees.  All of which would be good news for a pseudo-wartime economy that's increasingly driven by ever-expanding public and private debt.  Though, to me, it seems a never-changing climate would negatively impact the government's rhetoric war against the natural climate and the public debt/"boosts to GDP" (wink wink) incurred in the name of "saving the planet by eliminating plant food (CO2)!" but the market took it as good news anyway.

And who are we to argue with the market?  When a rate cut over 9000 comes along, it can only be good news.  Hang on a second, I've just been handed a note from my editor...

Er, according to this note, the Fed didn't cut rates at all!  I apologize for the error and wou...

NOTICE: In accordance with 1984 US Code § 2fu,

Ha ha!  Just kidding, of course!  I think!  Felt like engaging in a little "this-is-the-actual-direction-America-is-headed" humor while we still can!

Anyway, the Fed kept rates steady, making last update's commentary ("No matter what the Fed does, even if what it 'does' is nothing at all, the market typically reacts like this is earth-shattering news that has either appalled or amazed everyone on the planet.") interesting in hindsight.  

Last update also noted that we were "still in 'nothing particularly bearish has happened yet' territory" and that "given the sideways nature of the near-term market and the fact that the larger trend is still 'up,' the onus remains on bears to get something going."  So, Wednesday's rally was not a terribly unexpected outcome, though its ferocity may have seemed (or been) a bit overboard.

Chart-wise, BKX finally reached its months-old upside target:

And for SPX, it appears the prior sideways grind was probably a fourth wave triangle, which in turn implies the current rally is a fifth wave (degree unclear), so bears might get at least a little relief in the not-too-distant future.  Worth a mention that it almost reached the conventional triangle target already, and one more high would hit it... but this market is so gonzo that it's tough to say what it will do (other than continue the trend) unless/until we see an impulsive turn.

That's about it for today.  Trade safe, and don't let the Fed bugs bite.

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