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On Wednesday the FOMC cut interest rates by 1/4% as expected. Stocks sold off about 1/2%. Then Jay Powell's press conference began. No one seemed to like what Powell was selling. Lots of new uncertainty. Fewer rate cuts. Wait and see. Well, all was said and done the “risk on” were battered, bruised, and pleading for mercy.

While I had been discussing a mild and modest pullback I absolutely did not expect that kind of magnitude on the downside. As I wrote about and tweeted the other day, a few outlier studies suggested a quick shock to the downside, but not enough to change my outlook. Today is the final expiration of derivatives of the year. And it is the largest expiration of the year. I speculate that Wednesday afternoon’s plunge was exacerbated by this. I also won’t be surprised to see more volatility today.

I have been saying that the seasonals turn positive by today. However, the decline does not look complete. I think the market needs to see a new low for the week before a good trading low is established that sets up a rally into 2025. Ideally, 5850 on the S&P 500 gets breached first, but it’s not absolute. That’s the upper horizontal blue line in the chart below.

While my thesis has been for a mild pullback followed by a rally to new highs in January and then a deeper pullback, I may have to rethink that depending on how much lower stocks go here.

On Wednesday we bought QLD and more MQQQ. On Thursday we bought SPYB. We sold VGK, JNK, DXHYX and SPYM.

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