Title: Fed Interest Cut Rally! But Watch Out for Friday's Potential Drop! High Risk Ahead!.
Fullhapce Intelligence employs artificial intelligence and physics-based models to analyze market trends for swing traders, providing comprehensive reports and analysis on a daily, weekly, and monthly basis. Investors should be aware that our sector analysis may experience rapid changes due to the dynamic nature of swing trading, with 'short-term' referring to a period of several days in this context. Investors need to recognize that what is presented in this video and a long-term value investing strategy are of a very different nature. Fullhapce Intelligence disclaims responsibility for the results of any investments made.
This video data is as of September 13, Friday.
If you want to see the market forecast first, go to slide 6.
Howdy, Swings!
With the Fed's rate cut just a week away, the possibility of a 0.5% cut has further captured the market's attention.
The market recovered all of last week's losses and approached the SPX all-time high.
The market's recovery was faster than expected, but once it reached the SPX 5600 level, it met strong resistance that prevented it from going higher.
Will the FOMC meeting help the market this time around and allow the rally to reach new SPX all-time highs?
Let's take a look at Full Haps' weekly swing market forecast and consider the possibilities.
Let's review Weekly Market Index Movements.
The market has been in a steady uptrend for the past five days.
The VIX is down 27% this week, which is a pretty significant drop.
SPX: 5626.02, 4.02% up.
Dow Jones: 41393.78, 2.60% up.
NASDAQ: 17683.98, 5.95% up.
Russel 2000: 2183.2, 4.14% up.
Vix index: 16.56, -26.01% down.
Let's look into Weekly sector performance.
All sectors were green except for the energy sector, with the technology sector standing out.
The energy sector was down, while the technology sector was up over 8%.
Let's take a look at some of the reasons why.
Disinflation, the slow rise in prices, is underway, and it's good for the economy.
Central banks will soon be easing monetary policy, which will encourage consumption by lowering the cost of borrowing money.
People are feeling more positive about investing in technology.
Banks and companies are giving encouraging updates on their earnings at conferences.
These factors seem to be favoring the market overall.
Here are the Things to consider.
In August, inflation in the United States decreased to 2.5% for the consumer price index (CPI) and 1.7% for the producer price index (PPI). Inflation or wages also fell in Japan, Norway, Sweden, and the United Kingdom.
Blackstone's CFO suggested that adjusting for housing costs, the US CPI would be closer to 1.7%.
Central banks around the world are cutting interest rates.
The tech and AI sectors have been strong.
Retail earnings ended well in July.
Credit card companies reported that US consumers are still doing well overall.
The Federal Reserve updated its household wealth statistics showing that U.S. financial health is strong.
Travel demand is good, according to airlines.
Here we present the Weekly Market Forecast for swings.
Monthly market potential is becoming increasingly bearish, and volatility is on the rise, with the prospect of a month with a monthly close down more than 9% from the previous month within a few months.
Meanwhile, the weekly upside potential remains strong, but this week's encouraging sentiment has been tempered by uncertainty as we approach SPX all-time highs again ahead of the FOMC.
Investors don't seem confident enough to break through the SPX 5650 resistance, and are waiting with bated breath for the FOMC outcome, ready to make big moves in either direction depending on the outcome.
As such, we could see a lot of volatility over the next few weeks.
While it's hard to predict, we're leaning slightly towards the week starting September 16th with the possibility of a mildly higher close around SPX 5650.
In this scenario, we see the market moving sideways initially due to uncertainty in investor sentiment, but soon afterward, the market could pick up steam and go through some big swings.
In particular, with Friday being the Four Witches' Day, you may want to be on the lookout for downside risk from Thursday's intraday through Friday.
Based on the data so far, the second half of September is likely to be a rough one for markets in general.
Let's explore some additional insights.
Overall, things are still good for stocks because inflation is easing, the economy is strong, interest rates are low, and corporate earnings are good.
But stocks are still expensive, the slowdown is risky to smooth, and there's a lot of political uncertainty ahead.
Perhaps, the stock market will trade sideways for longer than we think, and we won't see SPX all-time highs in the near future, but if current economic trends continue, it's possible that we could see a big move higher before the U.S. election.
Let's look at the counterarguments.
The opposite scenario is that the market is so volatile that if the FOMC disappoints, we could go back to SPX 5350.
The rationale for the opposite scenario is as follows.
The latest US CPI showed that the cost of living in the US rose more than expected in August, driven by higher housing costs and a big jump in airfare.
Used car prices rose in July, suggesting that inflation may not come down easily.
Some companies are reporting that consumers are spending more cautiously due to dwindling savings, rising borrowing costs, and persistent inflation.
Boeing's largest union has decided to strike, bank stocks have been sluggish, and auto stocks have fallen.
Chinese stocks hit record lows on weak domestic demand and export growth.
A report from the IEA highlighted the downward trend in China's oil consumption.
The US budget is in bad shape due to unsustainable spending and income levels, and whoever wins the election will have to make tough choices going forward.
Markets are unsure about the economic plans of the US presidential candidates.
The conflict in Ukraine is escalating, which could make things even worse.
On top of all that, U.S. stocks are too expensive, and inflation is coming down too slowly, putting pressure on the economy before the election.
All things considered, we think the opposite scenario is also somewhat likely.
For traders resonating with the opposite scenario, this could be an opportunity to take some profits or add protection before the FOMC announcement and then buy low near the bottom.
The Conclusion is as follows.
We believe the market's upside potential for the week remains strong, but investors' confidence has been exhausted and uncertainty has reached a critical mass after this week's big gains.
We are slightly leaning towards a modestly higher close near SPX 5650 after a big move higher next week starting September 16, but we would not be surprised to see a big move lower in the opposite scenario, and we could see a lot of volatility in the coming weeks.
Traders may be wise to remain mildly bullish, but to monetize some of their profits and add some protection before Friday.
Also, traders may be wise to consider both out main forecast and opposition scenarios to manage risk effectively.
Thank you for watching.
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