New Era Unleashed: Fed Cuts

Market Rundown

September 18, 2024

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"Uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security." – John

Allen Paulos

Hello, my friends!

Today, we’re diving into some massive market news—probably the biggest event of the quarter, if not the entire year!

Weeks ago, a 50 basis point rate cut seemed like a mere rumor, but now it’s reality!

This marks a pivotal moment in monetary policy, with the first rate cut in years following the aggressive post-Covid stimulus.

The 50 basis point cut signals a stark shift, indicating that the era of tightening may be over.

While the Fed tried to downplay the significance, markets reacted strongly, closing the day bearish at the bottom of the range.

Let’s break down how this impacted market sentiment and price action!

FOMC Impulse (1.37%)🏦

2:00-4:00 pm Est

  • As we zero in on this macro event, all eyes are on the S&P 500 (SPY). 

  • The market kicked off with a bullish surge, blasting through the 0DTE level of 565 and hitting a high of 568, the day’s top supply zone.

  • Surprisingly, price stayed locked within its range for over an hour, signaling indecision until Jerome Powell's remarks.

  • By the end of the day, SPY closed bearish at 561, resting on strong demand with no major gamma shift, setting the stage for what’s next!

  • SPY 560 (0DTE Highest Level of Put Gamma)

  • SPY 565, 568 (0DTE Highest Level of Call Gamma)

  • SPY 561 (0DTE Positive/Negative Shift)

0DTE Levels: Zones of significant options volume in underlying assets, that can trigger an increase of volatility as the expiration approaches

These market levels are recalculated and updated daily, taking into account factors like gamma expiration, trading volume, and market volatility.

Coverage include Stocks, ETFs, Indices, Futures, and Crypto. For the most up-to-date levels and analysis, all information is available on MenthorQ.

FX Confluence - DXY Impulse (+0.93%) 📈🚀

As predicted, the weak dollar sank to new lows during a strong risk-on market, but the real surprise came when Jerome Powell took the stage.

The market’s shift was swift and unexpected, highlighting the importance of staying prepared and looking for key confluences ahead of any big rotations.

This is why planning for every potential outcome is essential—it’s never just about the first move, but how the entire picture unfolds!

U.S Dollar Headlines: 

  • The U.S. dollar strengthened after the Federal Reserve cut interest rates by 50 basis points, signaling confidence in inflation easing toward the 2% target.

  • Despite an initial drop, the dollar rebounded as markets digested Fed Chair Powell's comments.

  • Traders expect more cuts this year, with rates potentially dropping by another 70 basis points in 2024.

  • Treasury yields steepened, and the rate cut was described as more dovish than expected. Market reactions remained relatively stable despite the major rate move.

FOMC Headlines⚡

US Interest Rate Decision Actual 5% (Forecast 5.25%, Previous 5.5%)

Fed Officials' Median view of Fed Funds rate at end-2024 4.4% (prev 5.1%).

Fed: The FOMC has gained greater confidence in inflation moving sustainably toward 2%, judges risks to employment, and inflation goals are roughly in balance.

Fed Policymakers see 4.4% unemployment rate at the end of 2024 and 2025 versus 4.2% now.

Fed Policymakers see 2% GDP growth in 2024 versus 2.1% in June.

US rate futures price in chance of 64% chance of 25 bps cut in the November meeting.

Jerome Powell Speech and Q&A📰🗣️

  • "The economy is strong overall."

  • "Our decision today reflects growing confidence that strength in labor market can be maintained."

    • Historically, cutting rates signals concern over economic slowdown, so how can this stance on a strong labor market coexist with an aggressive rate cut?

    • The market seems to interpret it as a mixed message, especially when inflation and employment are both still key concerns.

    • Something doesn’t quite add up here!

  • "If the economy remains solid and inflation persists, we can dial back policy more slowly."

  • "No one should look at today and think this is the new pace."

  • "Housing inflation is one piece that is dragging a bit."

  • "Upside risks to inflation have diminished and downside risks to the labor market have risen."

    • Jerome Powell’s tone wasn’t adding up since we haven’t even seen one rate cut in over 2 years ..

Closing Thought 🧠

As FOMC day wraps up, the market remains in a state of uncertainty following the Fed's comments.

Jerome Powell’s remarks left many wondering about the future pace of monetary policy, especially after the bold rate cut.

While the market reacted with volatility, the overall direction remains unclear.

Traders and investors are left digesting the Fed's mixed signals, trying to gauge how this decision will impact the months ahead.

Stay tuned my friends!

Until next time,
Steve Benyi
Founder, The Daily Impulse

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This newsletter is for educational purposes only and does not offer financial or investment advice. It should not be taken as a recommendation to trade assets or make any financial decisions. Please be cautious and ensure you conduct thorough research or consult with a financial professional before making any investment choices.