Fed Day and the Markets Liked what Chairman Powell had to Say

Tom Gentile

Posted in
Newsletter

By: Tom Gentile
March 27th, 2024

4 mins read

Originally published via our newsletter previously. Subscribe for early access!

The markets don’t like uncertainty. This whole will the Fed cut or won’t they uncertainty over the past 20 or so trading days, is one cause for the sideways trading action over the past 20 or so trading days.

Investors and option traders alike tend to be less aggressive with their spending during periods of uncertainty, like the day before or the day of the Fed Announcement. With the term uncertainty comes another word called ‘volatility’ as in after a period of uncertainty, once an announcement or confirming news about a company is released the markets react in a volatile manner higher or lower.

Take today for example. The markets weren’t so much unsure about whether the Fed would cut as there was a 90+% chance of no action from the Fed.

The uncertainty was the forward-looking outlook about the Fed’s fight against inflation and the strength of the economy and if they were going to eventually cut and if so how many cuts were we to expect from them.

A key thing Powell stated was he and the committee see 3 rate cuts this year.

That seemed to quell any uncertainty and gave a definitive ‘for now’ answer that Yes, they will cut and how many to expect. The markets definitely reacted bullish/favorably post that announcement and press conference.


Market in Focus: DIA – SPDR Dow Jones Industrial Average ETF Trust

Figure 1: 60-day Candle chart on DIA
Figure 1: 60-day Candle chart on DIA

The Diamonds, as the ETF DIA is know as, tries to replicate the performance of the Dow Jones Industrial Average.

Today was a very bullish day. It wasn’t because the Fed took no action on interest rates. It was more due to the con firming dialogue Chairman Powell gave.

Powell mentioned he and the committee see inflation coming down, though still higher than they’d like, the labor market is strong. He said the risk between employment and their inflation goals are getting more balanced.

This, along with the stated 3 cuts to come this year (when there was recent speculation they may make less than 3), saw the markets ramp and close at or near their high of the day.

Tools and Observations

The markets are yet again trading at all-time highs.

Each time it makes a new high there is some concern of if it is going to be the blow off high in which a sell off or healthy pullback is coming.

The more this happens and the more one waits to see if the markets pullback, the more they are apt to miss the next move higher.

There is a philosophy out there pointed out by the founder of the Investor’s Business Daily, William J. O’Neill that has one investing in stocks or investing more into stocks at their 52-week highs.

The premise as I take it is strength begets more strength. For those that invest and or trade on this the new price high indicates the possibility of greater future gains.

There are a few more things to assess one can read up on as they deem fit.

My tools have the means to search up stocks at or even near their 52-week high.

With the news from the Fed today, it may be a situation where there is more bullish price action to come to the markets.

Since I highlighted the DIA in the Market in Focus page let me show you that you can look up ETF’s to see where it is as a percentage of its 52-week range.

In the tools, hover your mouse over the blue tab at the top titled Stocks.

Then hover over the line-item Stock Analysis.

Then left click on the top line-item titles Hi/Low.

You will be on the 52-week High, Low page.

Image 40

In the Wizard Criteria box, you can left click on the Stock Symbol circle and then type in the symbol, (in this educational scenario) DIA and then Search.

Image 41

The result list for the one ETF shows:

Image 42

Of course you could see this in a chart, but if you want the numbers flushed out the tools are a great way to go.

To search up the different stocks in the ETF and see what percentage of their 52-week high each of them are do the same thing as already shown, just in this case left click on the circle next to Stock List and then choose, (in this educational scenario), DJ-30 – the 30 stocks that comprise the Dow Jones Industrial Average.

Image 43

Here are all the stocks in the Dow that are at their 52-week high.

One now has the choice of pursuing investing or trading or pursuing any number of bullish option strategies they and their brokers discuss and deem appropriate for one’s portfolio.

Tom Gentile
C1P: Chief 1-Percenter


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