What the Rate Cut Means for the Markets By Larry Benedict, editor, The S&P Trader We got our trades back on track last week. We finished up $1,915 on a one-contract basis. That puts our accumulated YTD profit back up at $8,175 (on a one-contract basis). We also saw another quad-witching win last week, netting us an 11.25% gain. It’s not as large as some of our past quad-witching gains. But it’s still a solid return for a single day’s holding time. So stay tuned for our next quad witching in December… Altogether, last week’s performance reinforces the importance of staying the course even during rocky periods… 
(Click here to expand image) As of Friday, we’ve completed 250 trades so far this year with an 82% win rate. We’re averaging a 1.59% gain on capital committed per trade. That’s not 1.59% a year – our average holding period is just one day. That percentage might not sound like much. But small gains can add up quickly. If you made 1.59% a day and repeated that over the 252 trading days in the year, you’d be up 400.68%. And we’re aiming to build a strong last quarter of the year… Locked In Federal Reserve Chair Jerome Powell said that inflation was on a sustainable path back to 2% at the Jackson Hole symposium last month. That locked in expectations for a rate cut at the September meeting. But no one knew what size that cut would be. The majority of economists expected a 0.25% cut. In fact, a Reuters survey had over 90% predicting 0.25%. So the 0.5% cut caught the market by surprise. The 0.5% cut confirms the Fed’s belief about inflation being back under control. We’ll see if that’s borne out in the Personal Consumption Expenditures (PCE) that comes out on Friday. Yet a 0.5% cut could lead people to think that the Fed is worried about weakness in the jobs market. And more broadly, it could show they are worried about a recession. That’s why the market’s response to the larger 0.5% cut was relatively subdued. Both the SPX and the Nasdaq gapped higher on Thursday. Yet that rally fizzled on Friday. With inflation behind us, the market will focus even more on jobs to gauge the strength of the economy… and how that impacts the valuation of stocks. The next major data is on Tuesday next week (October 1) with the Job Openings and Labor Turnover Survey (JOLTS). And after that is nonfarm payrolls (NFP) and unemployment data on Friday, October 4. In the meantime, I’m expecting to see uncertainty handing us tradeable swings. So please keep an eye out for my alerts. And send your questions, comments, or suggestions to feedback@opportunistictrader.com. I’m always glad to interact with readers. Happy Trading, Larry Benedict
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