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MarketSurge powers the charts in this video.

Being a forward-looking machine, the market priced the rate cut ahead of the mid-September FOMC decision. This is why yields went down and rate-sensitive stocks went up in anticipation of the event. The market also tends to surprise the majority and often moves in a way that is counter-intuitive to most. It happened again last week. In a typical “buy the rumor, sell the news” fashion, yields rose after the rate cut decision. The jump acted as a headwind for the most rate-sensitive sectors like biotech, solar, housing, regional banks, and small caps in general. The money rotated back into big tech stocks and over the past two weeks, we saw notable upside moves in NVDA, TSLA, META, AMD, and SOXL. 

Then, on Friday we saw another lower-than-expected PCE inflation reading which confirmed that the Fed is on the right path. Rates resumed lower which acted as a tailwind to small caps, biotech, solar, and homebuilders while big tech took a break. The big question here is if we will see a continuation of that trend in the coming weeks. As Linda Raschke likes to say “The market is going to do the most obvious thing in the least obvious way”. We all know that the rates are likely heading lower but not in a straight line. There will be shakeouts along the way that will make you question everything.

In the meantime, Chinese stocks are in the midst of a monster rally. Many were up 30%+ in a week after several big upside gaps in a row. We saw a similar action in May of this year that was fully erased a few months later. The difference this time is the much bigger volume behind the move and a rising 200-day moving average which will bring more market participants to the field. If this move has more legs, we will likely sell pullbacks to rising 10 and 20-day moving averages that will get bought and offer much better risk/reward entries. 

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MarketSurge powers the charts in this video.

The Fed cut interest rates by 50bps, signaling that this time they are trying to be ahead of the curve – act before the economy slows down and unemployment rises. Time will tell if this is the right move. The net result is a new all-time high for the S&P 500. Small caps also gained and finished the week hovering near their 52-week highs. The Nasdaq 100 is still 4% off its all-time high. If it clears 485, it is likely to test 500. 

In the meantime, Utilities continue to rise unrelentlessly as if the market expects lower rates for longer, which would make the stock of any dividend-paying or capital-intensive companies more attractive. 

Semiconductors were among the weaker performers last week but there are potential winners even in that bucket – AVGO could be in play if it goes above 173, NVDA above 120, AMD above 160, etc.

Traditionally, gold and silver outperform during a rate-cut cycle. After a quick rug pull on Wednesday, they finished the week strong and are looking higher from here – GLD, SLV, GDX, SIL, etc.

The biotech ETF, XBI made another higher low and continues to consolidate for a potential breakout near its 52-week highs.

Overall, the price action is bullish. What would make me bearish? Seeing more high-volume selloffs in the indexes and major sectors. Seeing more sectors ETFs trading below their declining 20-day moving average.

I recently published a few children’s books. Check them out if you have kids or friends who have kids: Investing for babies, Trading for babies, Meditation for babies. You can find my other trading books on Amazon here.

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Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice. Read my full disclaimer here.

MarketSurge powers the charts in this video.

What a difference a week can make. The first week of September brought a brutal selloff across the board. In the second week, we saw a massive recovery. This reminds me of how January started. The big pullback in semis in the first week was followed by multiple weeks of a strong rally. The odds are low that we will see a repeat of that but we have to remain open-minded to the possibility.

The next FOMC meeting is this Wednesday. There will be a rate cut. The only question is 25 or 50bps. It seems the market expects a 50bps cut and might get disappointed if it doesn’t get it. There’s no reason to be short until we see stocks and the indexes closing below the previous day’s lows.

Last week, we saw a wave that lifted all boats. Not only interest-sensitive stocks like homebuilders and biotech rallied but also tech and many other sectors. It has been a high-correlation market. Correlations are typically high during corrections and the first stage of a recovery. SPY is within 1% of its all-time highs so it is not rational to talk about a correction here. 

The biotech ETF, XBI made another higher low and it continues to work on the right side of a big base. It is setting up for a potential breakout near 103. We are already seeing multiple individual biotech stocks break out and run. Individual stocks tend to lead the ETFs and the indexes.

I recently published a few children’s books. Check them out if you have kids or friends who have kids: Investing for babies, Trading for babies, Meditation for babies. You can find my other trading books on Amazon here.

Try my subscription service which includes a private X feed with option and stock ideas, emails with concise market commentary, real-time market education, the Momentum 40 list of market leaders, and much more. See what subscribers say about my educational service.

Check out my free weekly email to get an idea of the content I share with members. How my ideas/alerts did.

Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice. Read my full disclaimer here.