Fed Cuts Rates Quarter-Point, Markets Lower
Rate cut moves stocks lower
Major U.S. indices and futures traded lower ahead of today’s Federal Open Market Committee meeting and continued lower after the Fed cut rates by one-quarter of a percentage point.
Additional cuts are not yet guaranteed
Interest rates were cut to a range of 1.75%-2% in a 7-3 vote which indicates additional cuts are not yet guaranteed. Fed Chair Jerome Powell met with the press following the FOMC’s decision while oil remains in the spotlight with further developments on the latest attack in the Middle East.
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Short term support at the 50-days MA on SPY, $295
Following the Fed decision, the SPY remains between $294-$302 and we do not see the potential for the market to overshoot an all-time high of $302. The market has broken out of August range and short term support is at the 50-days MA on SPY, $295. We speculate the market is range-bound until we see additional key asset classes, such as TLT and DXY, breakout out of their existing trends. We will look to buy when SPY is near $282 and encourage Market Commentary readers to maintain clearly defined stop levels for all positions. For reference, the SPY Seasonal Chart is shown below:
The Fed cut the benchmark federal funds rate to a range of 1.75% to 2%
Following today’s FOMC decision to cut interest rates, U.S. stocks traded lower with all three major U.S. indices on track to close in the red. The Fed cut the benchmark federal funds rate to a range of 1.75% to 2%. The positive sentiment echoed by the Fed regarding the strong labor markets and maintained inflation objectives instilled fears over additional interest rate cuts this year.
Cut was a measure against risks according to Powell
Two additional FOMC meetings are scheduled this year for October and December. Fed Chair Powell indicated in his post-meeting press conference that the cut was a measure against risks, such as trade tensions and slower economic growth. Still, Powell assured “continued modest growth” and that the Fed is not forecasting a recession.
Globally, both Asian and European markets closed to mixed results. Tension in the Middle East remains with the latest development coming from Iran’s denial of a role in the Saudi Arabian oil facility attack. U.S. Secretary of State Pompeo traveled to Iran today while President Trump stated he does not want to go to war with Iran. With Iran already under the max economic sanctions, it is unclear how the U.S. can intervene at this time. Normal production for the Saudi oil facility should resume by the end of September.
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Using the “^GSPC” symbol to analyze the S&P 500 our 10-day prediction window shows positive signals. Today’s vector figure of +0.21% moves to +1.41% in five trading sessions. Prediction data is uploaded after the market close at 6 pm, CST. Today’s data is based on market signals from the previous trading session.
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Highlight of a Recent Winning Trade
On September 6th, our ActiveTrader service produced a bullish recommendation for TJX Companies (TJX). ActiveTrader is included in all paid Tradespoon membership plans and is designed for day trading.
Trade Breakdown
TJX entered its forecasted Strategy B Entry 1 price range $55.77 (± 0.38) in its first hour of trading and passed through its Target price $56.33 in the first hour of trading that day. The Stop Loss price was set at $55.21.
Thursday Morning Featured Symbol
*Please note: At the time of publication we do own the featured symbol, HIG. Our featured symbol is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader or MonthlyTrader recommendations. If you are interested in receiving Vlad’s personal picks, please click here.
Our featured symbol for Thursday is Harford Financial Services Group (HIG). HIG is showing a confident vector trend in our Stock Forecast Toolbox’s 10-day forecast. This stock is assigned a Model Grade of (B) indicating it ranks in the top 25th percentile for accuracy for predicted support and resistance, relative to our entire data universe.
The stock is trading at $60.73 at the time of publication, up 1.17% from the open with a +0.45% vector figure.
Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
Note: The Vector column calculates the change of the Forecasted Average Price for the next trading session relative to the average of actual prices for the last trading session. The column shows expected average price movement “Up or Down”, in percent. Trend traders should trade along the predicted direction of the Vector. The higher the value of the Vector the higher its momentum.
Oil
West Texas Intermediate for Crude Oil delivery (CL.1) is priced at $58.08 per barrel, down 2.12% from the open, at the time of publication.
Looking at USO, a crude oil tracker, our 10-day prediction model shows negative signals. The fund is trading at $12.29 at the time of publication. Vector figures show -3.76% today, which turns -1.88% in five trading sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
Gold
The price for the Gold Continuous Contract (GC00) is down 0.81% at $1,501.10 at the time of publication.
Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows mostly negative signals. The gold proxy is trading at $140.88, down 0.51% at the time of publication. Vector signals show -0.39% for today. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
Treasuries
The yield on the 10-year Treasury note is down 0.68% at 1.79% at the time of publication. The yield on the 30-year Treasury note is down 1.03% at 2.25% at the time of publication.
Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see negative signals in our 10-day prediction window. Today’s vector of -0.88% moves to -3.46% in three sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
Volatility
The CBOE Volatility Index (^VIX) is down 2.01% at $14.15 at the time of publication, and our 10-day prediction window shows positive signals. The predicted close for tomorrow is $14.53 with a vector of +6.07%. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.
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