Stage Set for Stock Market Fireworks After a Fed Rate Cut Next Week
Some limited progress in the market on Friday is a strong set up for interest rate cuts likely to be announced in a few days.
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After strong rotation into the small-cap sector on Thursday, the action turned mixed on Friday, with about 60% of stocks losing ground. The Russell 2000 gave back about 0.4% while money flowed into the Nasdaq 100 (QQQ) .
The difficulty with small-cap leadership is that it tends to be quite bumpy. AI and big-cap technology tend to have smoother momentum while the small stocks move up in fits and starts. That is largely a function of the fact that smaller stocks attract more speculative traders with shorter time frames.
It was a good week for the market as it overcame traditional weakness on cyber month. The limited upside progress on Friday was a good way to digest gains and to set the stage for the Federal Reserve interest rate cut, which is likely to be announced on Wednesday afternoon.
Technical conditions look good, and the Fed decision will be a good excuse for whatever happens next. A rate cut is well-anticipated, and the bears will be watching for a "sell the news" reaction, but if you have been paying attention this year, then you know that sell-the-news is often a mistake when it comes to the Fed.
I raised some cash on Friday after catching some good moves on Thursday. I’m optimistic about seasonal strength, but I’m trying to find some better entry points that will allow for more aggressive buying. I’m trying to avoid chasing and am looking for names with some support that are turning back up after the recent corrective action.
It should be a good environment for stock pickers, but it is going to require some effort to uncover some hidden gems.
Have a great weekend. I’ll see you on Monday.
At the time of publication, DePorre had no positions in any securities mentioned.
