In a speech that was essentially a mashup of all his other recent speeches, Powell reiterated at Jackson Hole on Friday that the pandemic – not historically dovish monetary policy – caused the recent huge spike in inflation. In fact, the Fed should be congratulated for putting out the inflationary fire that they started.

He did mention by way of a little joke that the Fed’s assessment of inflation being transitory was wrong, but that the Fed had plenty of company. Essentially, no harm, no foul.

Now, the Fed is apparently ready to lower interest rates. This view will ideally be underscored by Friday’s core PCE print. The market expects it and, in fact, needs it. But, anything more than 50 bps could be seen as the Fed panicking and could unravel the current rally as it stumbles merrily along.

continued for members…

ES is still inching higher, back in its rising white channel…

…while SPX is still inching higher while backtesting its.VIX is still lingering in rather low climes while contemplating a long, leisurely dip below its SMA200.EURUSD has seemingly topped out, so currencies should be of little benefit to stocks in the week ahead.. …unless the yen carry trade is resurrected. It’s one of the few factors which has nice potential to aid stocks if, in fact, the BoJ is willing to endure even more ridicule.

DXY hasn’t been this oversold for such a long time since 2020 and could really use a boost courtesy of the yen while waiting for the EURUSD to reverse. The USD’s weakness might not be much of an economic drag right now, but it will in a few months when inflationary YoY oil/gas factors start to bite.

Remember, oil/gas prices increase as the USD decreases. So, a rebound in the dollar could be very beneficial to the inflation picture, especially if the recent bounces get out of hand.
At this point, the market is counting on those rate cuts – meaning that the economic data between now and early November must continue to be bad enough justify stimulus but not so bad that it suggests a hard landing.

Unfortunately, the factors which got the market to where it is today are set to fizzle out in early November. So, it’ll be up to those rate cuts to deliver the kind of stimulus the Fed values above all others – higher stock prices.Stay tuned…