This serves as a recap for myself and is not to be viewed as any kind of trade suggestion. All views expressed are my own.
I’m taking a vacation tomorrow and next week but want to quickly write something down as a weekly cadence.
Fed cut rates this week as expected and median participant projection shows a further 25bps cut by end of 2026. The Fed is also going to buy some short term treasury bills starting next week. All in all, market watchers seem to see Powell’s stance as a bit more dovish than was expected. Although it’s well known at this point that he’s the soon-to-be ex-president.
The market reaction to this was a bit mixed. It initially rallied on Wednesday, but then sold off Wednesday night during the overnight session, completely giving back the gains. This sell-off also followed ORCL earnings, which apparently was disappointing.
Thursday saw another swing, a brief sell-off after cash open then quickly bounced and moved higher than FOMC high, seemingly clearing all obstacles, even had me adding some positions in my personal long term investment portfolio, given that the Fed has now clearly seeing inflation as 2nd place to the labor market, and set to keep loosen up financial conditions.
Only this time AVGO came after hours and apparently it was disappointing as well. Overnight Thursday night was actually relatively flat, it was only during Friday’s day session that some relentless selling came in, wiping out all FOMC gains, and all Thursday gains, and closing today at just a smidge above the 21 EMA on the daily.
Well, where does that leave us?
Frankly, I’ve no idea. On the one hand, this looks a bit awful and that 10% drawdown target of SPX 6100-6150 looks to be technically attracting. On the other hand, the daily is still above the EMA and the Fed has taken a more dovish and accommodating stance which could invite more participation. AI theme clearly is not doing so fire, as AVGO ended down 11% today but the other sectors are playing a bit of catch up as breadth has generally made a turn for the better.
What we do see is that the last three days after FOMC, the market’s range has widened a bit with back to back swings. This could mean that we are ready to pick a direction and go, whether that be down or up.
If I have to pick, it would seem likely that we might be heading higher at least for the remaining time of the year which come to think about it is less than 3 weeks now. We might be having a bit of Santa Rally and once we hit prior ATH we might get another leg lower.
But it’s impossible to know for sure beforehand. I will generally be looking for consecutive closes on the daily below that EMA to determine if price is confirmed to be heading lower perhaps towards that 10% target. Before that happens, the bias will be towards higher.
The Ephemeral Tourist
December 13th. 2025 @ 12:01am CST
The Ephemeral Tourist 