China's Google Move, Day After the Fed, Pivot Point Explained

The Financial Times broke overnight news that China had decided during that nation's trade talk with the U.S. in Madrid, to end its antitrust investigation into Alphabet's GOOGL Google. Beijing's State Administration for Market Regulation had announced in early February that it was looking into Google's suspected violation of that country's Anti-Monopoly Law without really getting more specific than that. While that is a positive for the U.S. company and for U.S. / China relations, Nvidia's NVDA chips that have been designed specifically for the Chinese market remain banned by China's Cyberspace Administration.

Perhaps This Is Why...

Chinese tech / telecom company Huawei unveiled its SuperPod technology earlier Thursday morning, which combines AI-capable chips with more than 15K graphics cards, and demonstrated a supercluster with 1M graphics cards. Huawei, hosting a company event, also announced a new lineup of AI-capable chips to the media in China that will be released over the next three years.

The Fed

By now, anyone reading this morning's note is well aware of the Federal Reserve Bank's actions taken on Wednesday concerning monetary policy. I covered the event in real time here at TheStreet PRO. The Federal Open Market Committee took the target range for the overnight Fed Funds Rate down to 4%-4.25% from a range of 4.25%-4.5%. The only dissent came from the new kid on the block, Stephen Miran who voted for a half point cut rather than a quarter point cut. The smaller cut was apparently just fine with both Fed Gov Christopher Waller and Fed Gov Michelle Bowman, both of whom dissented in favor of a first cut at the July 30 meeting.

The fact that Chair Powell was able to keep the entire committee unified, while a number of committee members are interviewing to wind up as his potential replacement as the Chair speaks volumes to the apparent influence he must still have with the group on the whole. Though the economic projections show a total of a half point worth of cuts over the next two meetings, which was expected, the dots show a less dovish Fed in 2026 than has been priced into Fed Funds futures markets.

In addition, during the press conference that followed the release of the statement, Powell stated "You could think of this in a way as a risk management cut." Powell admitted that a number of committee members lacked conviction in their economic forecasts and in where they placed their respective "dots." This put some doubt into the trading and investing public that perhaps the Fed had not actually pivoted towards a new easing cycle, but would be taking "it" on a meeting by meeting basis.

I would expect nothing else, given the way that this Fed has behaved all year after having not cut rates when conditions were perfect. Missing that mid-year opportunity, the Fed has been forced by labor market softness to cut now when conditions are not necessarily wrong, but are certainly less comfortable after some level of consumer inflation has reappeared.

On the Fed, I'll leave readers with my last few sentences written on Wednesday afternoon: "Though the market is reacting poorly at first, the direction of policy has changed. This likely results in a softer U.S. dollar and, going forward, higher equity prices. In my humble opinion, any market weakness over the next few days related to this outcome is an opportunity to add to long positions. Especially in growth stocks."

Treasuries

Markets were stronger on Wednesday than many think, despite the knee-jerk negative reaction just after the release of the materials associated with the FOMC meeting and Powell's press conference. After some back and forth, the U.S. Ten-Year Note went out yielding 4.07%, which was up just three basis points on the day, but almost eight basis points off of the low. This morning, it appears that the bulls have returned to that market as I have seen U.S. Ten-Year paper pay less than 4.05%.

Interestingly, though short-term yields are lower versus where they were earlier this week, U.S. Thirty-Day T-Bills are still inverted vs. nearly the entire curve all the way through that Ten-Year Note. In fact, each series remains inverted against the next maturity until we get out to the relationship between the U.S. Three-Year and Five-Year Notes. That is where the yield curve starts to normalize.

We'd like to see that point of normalization move out of Notes and down into Bills. That would be, in my opinion, a more fertile environment for economic activity as well as a more balanced market for both household and commercial credit.

Equities

Stocks, at least at the index level, traded flat to slightly lower for the Wednesday session. The S&P 500 gave back 0.1% as the Nasdaq Composite gave up 0.33%. All of the small- to mid-cap indexes closed between 0.18 and -0.19%. Tie goes to the runner? The KBW banks rallied nicely (+1.27%), but the Dow Transports spit the bit (-0.93%).

Seven of the 11 S&P sector SPDR ETFs closed out the day's regular session in the green, led obviously by the Financials XLF, while the losers were led lower by the Industrials XLI. That said, no single fund among these 11 closed as much as 1% from there it closed on Tuesday afternoon.

For the day, winners beat losers at the NYSE by less than a smidgen, while losers beat winners at the Nasdaq by an 11-to-10 margin. Yes, a smidgen is less than an 11 to 10 margin. Very interestingly, advancing volume took a 59% share of composite Nasdaq-listed trade and a 57.7% share of composite NYSE-listed activity. Hmm, that's more positive than many might have expected. Aggregate trading volume was elevated across the listings of both exchanges.

For Those Wondering...

Elizabeth O'Brien wrote a nice piece at the Barron's website on Wednesday afternoon. According to O'Brien's piece, should the Fed follow through on more rate cuts this year and money market funds ultimately tag along, she names a few funds to go with one's cash. Among those are...

- iShares 1-5 Year Investment Grade Corporate Bond Fund IGSB yielding 4.3%.

- Pimco Enhanced Short Maturity Active Fund MINT, yielding 4.29%.

- Marcus by Goldman Sachs 7-Month No Penalty CD, yielding 4.15%.

- Vanguard Mortgage-backed Securities Fund VMBS, yielding 4.09%.

- Barclays Tiered Savings Account, yielding 3.9%.

What Is a Pivot or Pivot Point?

Recently I received a request to explain what my pivots are when I lay out a technical plan for a stock. This was not a lone request. Apparently, the term is not broadly used and enough traders and / or investors would like a better understanding of just what the heck I am writing about when I write.

OK, all positions, long or short, must have at minimum, target prices and panic points. Why anyone would ever do anything involving risk without a plan that involves more than one outcome I will never understand, but people are people. As loyal readers know, I employ my 8% rule, which itself has been explained here at The Street PRO often enough in the deployment of my initial panic points.

Now, a more comprehensive and in my opinion, better plan not only includes target prices and panic points, but also "add" levels and pivot points. These are technical levels created through tried-and-true technical patterns. Everyone knows what patterns they are best at recognizing and identifying and it's not the same for all of us. Fortunately, the advent of algorithmic trading has made pattern recognition a much easier game than it used to be.

"Add" levels are where one is willing to increase position size. My guess is you figured that one out before I wrote this. Now, on to pivot points, which apparently are a little more confusing. I want you to be flexible here, because pivot points are flexible. Pivots are levels on the chart that can act as either resistance to trend or as an accelerant. Understand? One has to understand that professional money is controlled in 2025 by algorithms, not by crazy guys on Wall Street (Most of those guys got laid off in 2009) and algorithms behave much more in the same way as one another than that wild bunch of stickball players in colored jackets from the outer boroughs of New York City ever did.

Hence, a pivot is a potential endpoint to a move in either direction. However, pivots must be taken and held to reach target prices and once taken and held, momentum becomes a factor as those algorithms race and then, yes, cannibalize each other. Speed in the pipes (not kidding) matters.

Think of the pivot as something of a slingshot. It holds back, but once broken acts like lighter fluid as all of the players get on the same side and chase. Does it always work? Nothing always works. Does it work often enough to make a living? My opinion is yes (I left my last employer in 2016), as long as I was correct about the technical set-up. Often, when my pivots fail to either provide resistance or act as a springboard, it is because I got something else wrong in my analysis. Hope this helps. If not, I am still here. God willing.

Economics 

(All Times Eastern)

08:30 - Initial Jobless Claims (Weekly): Expecting 245K, Last 263K.

08:30 - Continuing Claims (Weekly): Last 1.939M.

08:30 - Philadelphia Fed Manufacturing Index (Sep): Expecting 4.1, Last -0.3.

08:30 - CB Leading Indicators (Aug): Expecting 0.0% m/m, Last -0.1% m/m.

10:30 - Natural Gas Inventories (Weekly): Last +71B cf.

4:00 p.m. - Net Long-Term TIC Flows (Jul): Last $150.8B.

The Fed 

(All Times Eastern)

No public appearances scheduled.

Today's Earnings Highlights

(Consensus EPS Expectations)

Before the Open: DRI (2.01), FDS (4.13)

After the Close: FDX (3.64), LEN (2.10)

At the time of publication, Guilfoyle was long GOOGL, NVDA equity.