FOMC Decision Looms: Powell Unlikely to Change the Market’s Course

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The rollover has slowed the markets, with the ES's range shrinking to just 36.25 points. The ES opened at 5708.75, then sold off down to 5650, bounced, and sold off again to a lower high. After that, the results of the 20-year auction were released, and both the ES and NQ popped briefly and then sold off again to another higher low. The market then rallied, making several highs at the 5673 level.

That’s when I posted in the room:

IMPRO : Dboy (2:49:12 PM): All these highs at 73-74 gotta pop the stops.
IMPRO : Dboy (2:51:31 PM): ES and NQ made several higher lows, and within seconds, the ES ran the stops above their respective highs, trading up to 5685, while the NQ popped up to 219,780.
IMPRO : Dboy (2:52:09 PM): You could see this pop coming. This is the type of stuff I do and always have done.

The ES seemed to want to hold better than the NQ (NVDA was down $3.00 to $4.00 all day). Both indexes upticked but there really wasn’t anything to hang your hat on as both went down on the day. Plain and simple, the two-day rally came to a screeching halt.

Despite everything, President Trump’s approval ratings are higher than ever. Last week, Republicans avoided a government shutdown, as did the Putin-Trump phone call, but Trump left out one of Putin's key conditions: "to prevent an escalation in its war in Ukraine would be the suspension of foreign military aid and intelligence to the Ukrainian government.”

The phone call meeting with Putin seemed to go well, and tariff-related chatter has been on the down-low this week. That said, Tesla (TSLA) and Nvidia (NVDA) both sold off, with the NVDA CEO addressing the chip maker’s AI conference. Additionally, the communication services and information technology sectors were the worst performers on Tuesday, making it difficult for the rest of the markets to rally.

The tech-heavy Nasdaq Composite led the decline, falling 1.7%, while the ES was down 1.1%, and the YM dropped 0.6%, definitely a horse of a different color. Meanwhile, a new survey of fund managers showed a record rotation away from U.S. stocks, reflecting growing concerns about global growth.

Here is a link to the WSJ growth story:
Investors Ditch U.S. Stocks, Worry About Global Growth.

I know I’ve said before that I’m not here to fight city hall and if the ES is going up, I want to go for the ride. But I left something out - if the ES is going up or down, I want to go for the ride.

I’ll keep this short. I never really got overly bullish because I believe there are just too many negatives facing the stock market. One is really simple: the market has surged over 50% in two years. Another issue is the concentration of 7 to 10 stocks making up 32% to 34% of the total market cap, which was already a concern in 2023 but has become an even bigger issue in 2024. And last but not least, the biggest drop in allocation to U.S. equities on record. A net 23% of respondents said they were underweight American stocks.