Fed Pivots and Stocks Explode

Green is all we've seen

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Our View

Four months ago the Fed was talking about further rate hikes in 2024 and now it's talking 3 rate cuts. And guess what? That decision was based on all the positive economic reports we have been seeing. Inflation is down — as is gas but food prices remain high. 

In today's Fed turn around, Chairman Powell said: I have always felt there was a possibility the economy could avert recession while inflation came down, and so far that's what we are seeing. 

The result is not guaranteed, but when he said that, the ES exploded higher. At the end of the day, both the ES and NQ closed up 1.4%. The YM (Dow Future) settled at an all-time new high at 37,111, basically 300 pts above the old contract high. All three major indexes are on track for their seventh consecutive weekly gains. Yields on the benchmark bond — which touched 5% just weeks ago — are about a full percentage point lower, closing Wednesday at 4.032%.

Our Lean — Danny’s Trade

This is Danny Riley’s personal trading plan for the day.

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MiM and Daily Recap

ES Recap

The ES traded up to 4709.25 on Globex and opened Wednesday's regular session at 4700.25. After the open, the ES traded 4698.25 at 9:33, sold off down to 4696.75 at 1:47, and rallied up to 4734.75 at 2:24 after the Fed headlines hit the tape. Yes, if you are wondering how the recap could be this small, it's because the first 5.5 hours of trade was a slow, narrow, grinding 10-point range trade. 

After the 4734.75 high, the ES pulled back to the 4727 level and then made 8 new highs up to 4764.25 at 3:06. After the high, the ES sold off down to 4737.25 at 3:25 and then traded up to 4752.25 at 3:38 as the early imbalance showed $590 million to buy and flipped to $260 million to sell. It sold off down to 4747.50 at 3:53 and traded 4760.25 on the 4:00 cash close. After 4:00, the ES traded 4763.75 and settled at 4763.00 on the 5:00 futures close, up 64 point or +1.43% on the day.

In the end, all I have to say is this ship has sailed. In terms of the ES’s overall tone, it was a mammoth buy program. In terms of the ES’s overall trade volume was higher: 190k traded on Globex and 1.39 million traded on the day session for a total of 1.58 million contracts traded.  

Technical Edge

  • NYSE Breadth: 89% Upside Volume (!)

  • Nasdaq Breadth: 80% Upside Volume 

  • Advance/Decline: 89% Advance (!)

  • VIX: ~12.25 

S&P 500 — ES Futures

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Economic Calendar

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!

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