Powell said what many of us have been thinking: There’s no reason to rush into a rate cut. The part he didn’t say (but implied) was that there was a clear risk to cutting rates at this time.

The market, which has been fueled for months by rate cut expectations, was quite disappointed. SPX shed 1.5% and closed at the bottom of the acceleration channel it’s been in since October. It was only a little bit scary.

Futures fell to slightly below our initial downside target before rebounding overnight on the usual algo nonsense.

Does yesterday’s action change the overall picture?  Maybe.

continued for members…

The key will remain the ability of SPX and ES to adhere to their channels from October. If the channels break down, we’d likely get a backtest of the large IH&S pattern necklines. Otherwise, the meltup will continue.

A breakdown would likely require VIX to push above its super-low SMA200 and reach at least 17.25 or 19.25.

It would also require DXY to break out above its SMA200, which would likely require EURUSD to break down and USDJPY to continue melting up. When we think of catalysts lately, we often think of oil/gas markets and the effect they have on interest rates. The 10Y broke down from its small, red channel but has reached the same large red channel midline that has saved it multiple times in the past. If it were to hold here, it might be because of the potential for RB to zip up to its SMA200 – currently at 2.43. One possible bearish path, but cautious bears would be better off waiting for the channel to break down.

stay tuned…