Powell Boosts Price Action, Supports More Risk and Exposure
I am looking to add further risk and exposure following the Fed chair's latest commentary.
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Technical conditions were ripe for a positive reaction to Federal Reserve Chair Jerome Powell, and that is what happened. Although the Fed raised its inflation and unemployment expectations and cut its GDP projects, the market liked Powell’s optimism about the health of the economy.
Powell commented that uncertainty is remarkably high and stated that the Fed is well-positioned to wait for further clarity as the market was unperturbed. The most dovish development was that the Fed has cut its balance sheet runoff, which is tantamount to an interest rate cut. It is now expected that there will be at least two quarter-point cuts in 2025.
Powell’s comments were mixed, but the market embraced a positive spin, which helped to trigger a technical follow-through day. Volume was a little light, but the size of the move coupled with three-to-one positive breadth is a promising sign. The economic bears may have some ammunition, but the bulls have positive price action, which is what matters most in the short term.
With the higher high in the indices on Wednesday, the bulls have the advantage, but how much further can they run with it while we face more tariff drama and some weakening economic news? I don’t know the answer to that, but this price action is supportive of more risk and exposure. I’ll be looking for buys on Thursday as the market digests the words of wisdom from Powell.
Have a good evening. I’ll see you tomorrow.
At the time of publication, DePorre had no positions in any securities mentioned.
