The Fed forecasts three rate cuts in 2024 while the E-mini NQ and E-mini Dow set record highs!
TRANSCRIPT
Good afternoon, traders. It’s Bill Baruch with Blue Line Futures and I’m bringing you a post Fed wrap up. But before I get to Andrew, watch this on YouTube. Please click the link below and subscribe like and subscribe to watch it from our website resources link below to direct you to YouTube and you could subscribe that way. We love you.
Follow us. We’d love for you to help us build our following. All right, let’s get to it. What a day, what a week, What a year. I mean, you know, before we dive into Fed chair Powell, we are seeing record highs today in the Dow with the futures roll. We’re seeing record highs in the Nasdaq and the S&P.
What the futures roll is about 1% from its record high. So what a move. All right. We got from the Fed today. This is an official pivot. I think you have to call this a pivot. I mean, they are not talking about rate hikes anymore. Hikes are off the table. They are talking about rate cuts and the dot plot forecasted three rate cuts next year.
We’re also seeing the odds, according to the CME’s Fed Watch Tool show, a 66% probability the Fed cuts in March. Now, I was thinking there could be some doubt here it might be priced in a little too early. I think after today, it’s not after today that being priced in. It’s not too early. And then again, the reason why I thought that it couldn’t be was when the Fed typically pauses.
You see a rate cut seven months, seven months, an average afterwards, and that’s kind of lines up fairly well. But this week as well, we’ve seen inflation come down. We’ve seen PBI come down and stay down. It’s becoming that’s been trending down. But today’s data from PBI, yesterday’s data from CPI confirms that we continue to see this trend lower.
The Fed is using that data and really showing us today that that they are I wouldn’t call it a victory lap but but they see the light in the tunnel here is it is loud and clear that they see the light at the end of the tunnel. And the risk of doing too much is is outweighing the risk of doing too little.
And that was something going back a couple meetings ago that they really highlighted, I think in September that was really that it started to lay the groundwork for the pivot. Now, when it comes to inflation, I think they’re feeling very confident in that venture. Powell even highlighted that the supply chains should continue to ease and continue to bring inflation down.
I think overall, he highlighted that, I believe, twice or three times in the press conference. So I think they’re very confident in the direction of inflation here. We should be seeing a to handle soon some of the data, other other just activity data growth and one that we’ve seen kind of just trickled down a little bit. But Venture Powell did talk about if we see growth start to reemerge and so even inflation start to reemerge.
But if growth he did highlight it could be a reason to be looking at, again, hiking rates at some point. But where we’re looking at it now, I mean, you get to a five and a half percent Fed policy rate and you got the ten year yield now at 4%. I mean, these if you’re looking for a recession, you know, you’re looking at yields coming down to 4% in ten year, but inflation is at 3% and the policy rates at five, having that that sort of divergence right there, that lays the groundwork in a slowing growth environment to see a recession.
And I don’t think they want to see a recession. They see the light in the tunnel here to be able to get through this clearly. So that what we saw today was it was sort of an everything rally except for the dollar. Of course, you got got that. Again, the record highs within reach or across the board, much of this big, huge day for the Russell 2000 out above 1900.
You got gold and silver showing up. You got the ten year down to 4%. As I highlighted, you have a terrific move in the two year. That’s down to the lowest level since the summer on the yield side. But potential really strong, beautiful chart breakout and the two year prices on the futures contracts. So you got a lot of tailwinds here for a risk on.
Now we’ve seen this before where you have a message delivered, a reaction in the Fed day and then it sort of disappears. Now, I don’t think that’s going to be the case today. But as we move into close out the week, you know, you want to make sure you’re managing risk properly because you’re looking at stuff in the S&P overall.
If you’re chasing this move. 4707 that was the previous gap in the in the March 2024 contract. Going back from the summary highs, gas down about 47 or seven. Ironically, it was the level where this market lifted off at that at the meeting as well. You want to make sure some of these some of these levels are valid.
Look at the commodities. Gold is back to the scene of the crash. Last Friday’s non-farm payroll report. Silver as well. Same thing. Now. You got crude oil trying to regain 70 bucks. Some bullish headline data today from the EIA. But overall, it’s trying to potentially see a move that could help bring build it to copper showing a good move.
No new lows. Data out of China tonight early this morning was, you know, a little underwhelming so it’s good seeing this commodity show up. The US dollar is weakening. Keep an eye on the currencies and keep an eye on the treasuries. They will confirm if this is something they can stay in through closing out the week. If we want to see this this move on, we on a weekly closing basis.
But it sure as heck is great to see here for now. And our team is always here to help. So don’t hesitate to reach out. Three. One, two, 2780500. Remember, futures trading involves substantial risk of loss is not suitable for all investors.