Weekly Update: What the Heck Happened Thursday?
Good evening, and welcome to this week’s edition of Stealth Trades!
They never learn…
These “expert” economists that run the Federal Reserve are anything but.
At the end of 2021, the Fed planned to raise rates 3 times with a target rate of less than 1.0%.
It raised rates 7 times. And the target rate soared to 4.50%.
They said inflation would be “transitory” …
It wasn’t. 2 ½ years later, prices are still rising at an above-average pace.
Heck, it was their own reckless money printing that caused the inflation in the first place!
These clowns have a long history of incorrect forecasts and bad projections.
And when they screw up, they OVER correct to fix their own mistake, wreaking havoc on consumers and the everyday investor.
If they are not going to get it right, the least they could do is learn to shut up.
But everyone wants their 15 minutes of fame. And on Thursday, Minneapolis Federal Reserve Bank President Neel Kashkari got his.
He gave an interview to Pensions & Investments on LinkedIn Live.
And unlike Fed Chairman Jerome Powell, who is careful to follow scripted remarks, Kashkari spouted opinions of his own. And at 2:03pm ET, he said this…
“But if inflation continues to move sideways, makes me wonder if we should cut rates at all this year.”
You don’t do that.
Especially after Powell just confirmed the Fed’s plans to cut rates 3 times in 2024.
This mixed messaging caused panic. And traders dumped stocks like they were on fire.
Above is a 5-minute chart of the Nasdaq index showing how things played out.
Thursday morning, the indexes were less than 1% from all-time highs.
By the close, the Nasdaq was touching the 50-day moving average… the first time it has done so since November.
In one hour, we learned what investors fear the most – interest rates.
Outside of a Black Swan event, failure to act by the Fed and follow through with its promise of rate cuts is the only thing that will kill this bull market.
Hopefully, Powell and his clown posse will go into damage control.
Traders will be looking for assurance. They want to hear that Kashkari misspoke and rates will soon come down. The sooner that happens, the better.
This may very well end up being a small, short-term pullback. Stocks are in the middle of a historic rally, so the trend is definitely on our side.
As of Friday morning, at the time of this writing, the index is just 3% off its highs. It is in no way time to panic.
But we just witnessed the first sign of weakness in 5 months. If this behavior continues, we will start playing defense.
Until then, stay the course.
Right now, I am looking for two things – stocks pulling back to obvious support areas, and stocks that held up better than others in Thursday’s selloff.
The first group is to identify pullback buys in leading names.
UBER pulled back to its 50-day moving average (red line) and is already bouncing off that level.
This is a classic pullback buy setup.
Stocks that held up better than the rest will be the market leaders.
META, for example, was up on the day.
That is a clear sign of strength.
Try not to exit the market prematurely. You want to play trends until they end, not until you think they will end.
Or as I like to say… Either ride her ‘til she bucks you, or don’t ride at all.
Best wishes for your trading,
