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FOMC Lowers Rates Aggressively On Hump Wednesday

By Kurt Osterberg · On September 18, 2024

Are we over the hump?Those of you who do not look at X, here is a great summary of today’s FOMC by the Kobeissi Letter:

Fed cuts interest rates by 50 bps for first time since 2020

Fed sees 2 more 25 basis point rate cuts in 2024

One Fed governor (Bowman) dissented for the first time since 2005 in favor of a 25-bps rate cut

Fed gained “greater confidence” that inflation is moving to 2%

Fed will “carefully assess incoming data” and evolve outlook

Fed sees 100 bps of rate cuts in 2025 and 50 bps of cuts in 2026

The long awaited “Fed pivot” has officially begun.However, not so fast in celebration-The last 2 times the Fed’s first cut was 50+ bps:Jan 3, 2001 – S&P 500 fell ~39% next 448 days which led to a recessionSep 18, 2007 – S&P 500 fell ~54% next 372 days – Unemployment rose another 5.3% – Recession.Yet, this is so very different than 2001 and 2008.The tech bubble looks more like a tech correction.And there is no real estate crash or mortgage debacle.So, what happens at least for the rest of this week?Perhaps we get the soft landing.And perhaps stagflation becomes the newest mantra with a lot more easing on the table-or as I say on media:Stagflation is a speed bump to recession.Regardless, Granny Retail XRT continues to have my attention.I will follow her. Over 80 I am all in on a bull run in equities.Under 70, I am cautious, if not bearish, in equities.And Commodities?

We have to watch the dollar to see if 100 holds or not.Unless there is a significant rally, a bounce from here should not be too impactful.However, if there is a huge drop under 100, that would reduce Granny’s purchasing power, drive prices higher and give us that stagflation.For commodities?We recommend you watch DBC and DBA and forget CPI PPI and PCE.
At this point, DBC (article yesterday) must make up its mind.But DBA looks about to tackle the 2024 highs.Both will tell you better than anything else where hard assets are going and in turn, inflation.
ETF Summary(Pivotal means short-term bullish above that level and bearish below)S&P 500 (SPY) 560 pivotalRussell 2000 (IWM) 210 pivotal 220 resistanceDow (DIA) New all-time high and reverse???Nasdaq (QQQ) 465 support 477 resistanceRegional banks (KRE) 57 pivotal and a sector to watchSemiconductors (SMH) 230 support 240 pivotal- a crash here not healthyTransportation (IYT) 67.00 support-this liked the rate cutBiotechnology (IBB) 145 support 150 resistanceRetail (XRT) 73.50 support 77 resistanceiShares iBoxx Hi Yd Cor Bond ETF (HYG) Made a new high and closed on the lows of the daily range-keep watchingMore By This Author:Economic Modern Family-The Good, Bad and UglyIs The Market Over The Hump? Market Thoughts This Labor Day Weekend