The Market Remains in the Fed's Hands By Larry Benedict, editor, The S&P Trader After a strong run at the start of this month, we took a step back last week… We finished out the week down $1,592 on a one-contract basis. That dropped our accumulated year-to-date profit back to $9,555. Yet our overall progress is still strong this year. And we have plenty of time to grow our profits further and beat last year’s result. Check out last week’s trades below… 
(Click here to expand image) As of Friday’s close, we’ve done 274 trades for the year. And 82% have been winners. We’re also averaging a 1.76% gain on capital committed per trade. That’s not 1.76% a year. Our average holding period is just one day. Now that small percentage might not sound like much. But small gains can add up quickly... If you made 1.76% a day and repeated that over the 252 trading days in the year, you’d be up 443.52%. Now let’s look at what’s ahead… Inflation and Jobs Are Still Driving Forces On the economic front, a couple of data releases will catch the market’s attention this week. On Thursday, we learn about retail sales. Then building permits and housing starts follow on Friday. Retail sales and building permits can offer a handy insight into consumer confidence. Retail sales data can fluctuate quite a bit. After a bumper reading in July (up 1.1% month over month), they slid back to a 0.1% rise last month. The market expects to see September recover to up 0.3%. Building permits saw a subdued period from April to July. Yet last month, building permits hit their highest level in five months. Economists are predicting that to plateau this month. And outside of those data points, the main story will carry over from the last couple of weeks. Jobs and inflation will continue to determine the timing and size of potential rate cuts. On Wednesday, the Fed released the minutes from its September meeting. The Federal Reserve believes that inflation is under control… and they showed concern about a weakening jobs market. This was the reasoning behind their large 0.5% cut. But as we discussed last week, since that meeting, job numbers have recovered strongly with unemployment falling. And the consumer price index (CPI) inflation data last week was up 0.2% month-over-month versus the 0.1% forecast. That shows the Fed can’t be complacent about inflation. Rising job numbers and higher oil prices (from escalating hostilities in the Middle East) can put upward pressure on inflation. That makes it harder to cut rates – especially big cuts. Already Fed Chair Powell has stated that he’s in no rush for the next cut. Plus, the meeting minutes show that the 0.5% cut wasn’t unanimous. Several committee members preferred a 0.25% cut. That just about wipes out any prospect of a second 0.5% cut at the Fed’s next meeting in November. Now the question is whether we’ll see a cut at all… or will have to wait longer. And that ongoing uncertainty is going to be a market driver over the coming month. As always, I value your feedback. If you have any questions, comments, or suggestions, please send them to feedback@opportunistictrader.com. Happy Trading, Larry Benedict
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