Stock Pickers Active, Dow Jones Lags Ahead of Fed Announcement
Many investors are looking for a "sell the news" reaction to the Fed, but strong dip buying support is likely.
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Small-cap stocks outperformed again on Tuesday, helping push breadth to around 59% positive. The DJIA lagged, down 0.3%, while most of the market meandered as investors awaited Jerome Powell and his Merry Pranksters.
It was one of the sessions that didn’t offer much meaningful insight. The S&P 500 fizzled out as the day proceeded, but there was a good amount of stocks moving up more than 10%, which illustrates a continued appetite for speculative exposure. There were 180 new 12-month highs, and the most notable strength was a rebound in bitcoin (IBIT) and Ethereum (ETH) . Cryptos have stunk up the place recently, and it is a good sign that they are attracting attention on the eve of the Federal Reserve's interest rate decision.
I’ll have more on strategy for the Fed decision early on Wednesday morning, but the primary thing to remember is that a quarter-point cut is a near certainty. What will move the market is the tone of Jerome Powell’s comments and any shift in expectations of two more cuts in 2026.
Many traders will be looking for a "sell the news" reaction to the Fed, but my view is that if there is a dip, it will be short-lived, as there is a large supply of buyers trying to catch positive December seasonality and a Santa Claus rally.
Have a good evening. I’ll see you in the morning.
At the time of publication, DePorre had no positions in any securities mentioned.
