Stocks fell off a cliff yesterday after Jay Powell delivered an arguably hawkish rate cut. The market reacted particularly strongly to the revised outlook for 2025 wherein the number of rate cuts was reduced from four to two.

ES tumbled through our initial downside target at the 50-day moving average and is only just now hovering right below it.

The market finally accepted what we’ve been saying for months: inflation is not fixed, and in fact is on its way higher.

Wishful thinking has kept the market on the rise for over a year. It was further buoyed by post-election euphoria. All of that was unraveled by a 10Y which very conspicuously broke out of a falling channel.

continued for members…

While one could argue that ES’ yellow channel midline could be the terminus for this correction……I think SPX downside target at 5750ish is more compelling. And, I think the SMA200 is very much in the running. The biggest issue will be the 10Y which, in line with our forecast, very clearly broke out of the falling white channel.

I’ll be working on updating the 10Y chart today, but it seems very likely that it will reach our 4.6% target – which would present additional problems for stocks.

The dollar has nearly reached our 108.92 target, aided of course by USDJPY.

It will be an uphill climb from here.

More later…