To The Moon

THOUGHTS ON WHAT HAPPENED TODAY IN THE GLOBAL CAPITAL EQUITY MARKETS:

Okay, so today was an absolutely WILD day after the FOMC meeting.

There are many things to discuss...but here's the bottom line:

It kind of feels like a mini-August 5th.

Let's get into it....

So, why did the market go down across the board after the meeting?

First off, the market was upset that the Fed is only going to do 2 cuts instead of 3 cuts in 2025. However, it's not just about the lack of cuts...it's about the lack of clarity around why they are cutting NOW. Inflation is on the rise and we can see that through CPI and PPI.

Many reporters tried asking Powell about this, but his argument was just that the labor market was weak. This was NOT enough of an argument to get the markets on board with justifying a cut and that could have been a reason they were upset.

Today was going to be a catch 22 no matter what: if we didn't cut, markets would tank. If we cut but lowered cut expectations in 2025 (which we did) then markets would tank because they would be wondering what was the point of even cutting today.

All of that to say....if it was going to be a lose/lose situation...that's when markets become irrational.

By 3:45PM EST, almost EVERY SINGLE stock/index had made an intra-day bottom. By 4PM (market close), most names were up 2-3% from where they were down on the day, implying that algorithms took over and decided to buy at that 3:45PM level.

This MATTERS because it could signal that people on the sidelines with cash stepped in, algorithms decided there was enough pain (many of these algos probably were waiting for a day like this) and market participants broadly decided that buying the dip was not a bad idea.

Could this be a bull trap? Yes, but it also could be a random flash crash like we saw on August 5th (VIX was up 600% that day, today VIX was up 74%) and the volatility was due to the market not really understanding how to interpret inflation and rate cuts going into 2025. We also have the BOJ making a rate cut decision tonight which could add to volatility along with a potential US government shutdown, so when you put all of that together -- along with the fact that markets were extended -- you could see a day like this.

However, there are $7T on the sidelines. Q3 earnings across the market were exceptional with strong guidance for Q4. Oil is still at $70 and below. Trump is coming in with pro-growth policies (that could be inflationary but it will have to be managed). AI is still very real and you can ask Broadcom $AVGO if you are curious about why.

The tailwinds for the market are strong but I think people were looking for ANY excuse to sell and now this is actually becoming a pretty decent set up for a Santa Claus rally because it's easier to rally after going down 5-10% vs rallying from all time highs.

DID YOU BUY THE DIP & WHAT DO YOU THINK HAPPENED TODAY?