Markets have been on the ropes all year, which made Wednesday’s Fed meeting an important one.<\/p>\n
There were rumors that the Fed would raise rates by 50-basis points more than market expectations – or that it would eventually do it later in the year.<\/p>\n
But 15 minutes into the press conference, Fed Chairman Jay Powell spoke these magic words:<\/p>\n
“A 75-basis point increase is not something the committee is actively considering.”<\/p>\n
And like magic, the market rallied 3.5% in about 90 minutes… squeezing the short sellers and the bad sentiment out of the market.<\/p>\n
It’s amazing how a one-day rally can change everyone’s mood…<\/p>\n
But the real market reaction after a Fed meeting can’t be gauged over the course of two hours.<\/p>\n
For example, take the meeting on December 15…<\/p>\n
The market was sensing the Fed would eventually pivot after months of calling inflation transitory and making official statements like, “we’re not even thinking about thinking about raising rates.”<\/p>\n
As expected, Jay Powell did pivot.<\/p>\n
And still, the market rallied. Everyone thought the coast was clear.<\/p>\n
This was the meeting that set the pieces in place for most of this year’s losses. The market has now completely transitioned into an all-out freefall.<\/p>\n
After yesterday’s bullish<\/a> reaction, many think the coast is clear once again.<\/p>\n Jeff Clark and I saw this relief rally coming. On Monday<\/a>, Jeff pointed out oversold conditions in his essay. And on Tuesday<\/a>, I pointed to valuations reaching a place where buyers could start to find value. <\/p>\n But this rally doesn’t mean we’re going to new all-time highs soon.<\/p>\n There’s a difference between anticipating a short-term squeeze and going all-in for a sustained rally.<\/p>\n Jeff explained it best in yesterday’s morning update<\/a> to our Delta Direct<\/em> subscribers…<\/p>\n A rally like yesterday’s usually only happens in bear markets. It’s caused by a combination of oversold technical indicators and extremely bearish sentiment. It’s a “rubber band” snap-back rally. So, we’re probably not going to get new highs in the broad stock market.<\/p>\n<\/blockquote>\n\n