1. Federal Reserve: “Higher for Longer”
We got a 25 bps cut yesterday. I don’t know why some were calling for 50 bps. With markets at all time highs, economy still somewhat intact.
What’s interesting is that, in its projections, the Fed is saying rates go lower and inflation goes lower too.
But also pay attention to the longer-term federal funds rate projection — it’s still sitting at 3%.
Essentially, the Fed can’t be clearer: we’re in a “higher for longer” world. The Fed isn’t seeing zero rates anytime soon.
2. Bank of Canada: Slow Economy, Lower Rates
Word for word from the Bank of Canada:
“With a weaker economy and less upside risk to inflation, Governing Council judged that a reduction in the policy rate was appropriate to better balance the risks…”
In simple words: the economy is slowing with inflation risk declining. Rates go lower.
Keep in mind: the Bank of Canada can’t outright say there’s a big crisis at hand. They know it, I think, but trade-related issues are holding them back.
3. Markets: Waiting for the Real Move
Major indices like the NASDAQ and S&P 500 were essentially flat/down a little. Yes, there was a reaction at the time of the rate cut announcement, but things calmed down afterward.
This can’t be stressed enough: at the time of announcement, a lot of algos react + traders pile into a direction to see where they can position. The real trend comes later. Give it time to digest.
Real move could very likely come today and tomorrow, and that trend could continue for a while — so be mindful.
4. Commodities Watch: Gold, Oil, Nuclear, Copper
Gold: Popped on the Fed’s rate cut announcement but lost ground quickly. Did not close at the low of the day. Levels to watch: $3,707 and $3,645 — a move above or below these levels could bring buyers or sellers.
Oil: Wants to go higher but continues to struggle.
Nuclear: Saudi Arabia is building its first nuclear power plant. No misprints — you read that correctly. Why not diversify, right?
Copper: Has rejected its 200-day moving average several times. $4.30 is a big level to watch for a downside move.
5. Currencies & Yields: Dollar, Bitcoin, and Sentiment
Yesterday, the U.S. Dollar Index dropped below 96.50 for a few minutes and bounced back. Keep a close watch on this level — a break below it takes the dollar to 2021 lows.
Bitcoin continues to hold its 50-day moving average very well — held it again yesterday after the rate announcement.
Did you see the U.S. yields pop after the rate announcement? How can this be?! Remember: “buy the rumor, sell the news.” Yields had been declining in anticipation of the cut; data was somewhat supportive too.
Just so you know: Canada doesn’t just have a debt problem. There’s also a sentiment problem.
And, $NVDA invests in $INTC
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