104% Probability Rate Cut This Wednesday – First in Nine Months Coming
Ahoy there, Trader! ⚓️
It’s Phil…
Another new week, and we’re halfway through the calendar month with some Fed rate nonsense ahead – apparently it’s a big one. “That’s what she said!”
Getting back on track, SPX continues its struggle higher, but the daily chart tells the real story: ever-decreasing pushes higher with smaller “dips” and less distance between them. The momentum has definitely left the building on this one.
That doesn’t mean we can’t see this continue to chug along and defy gravity – but not indefinitely. Winter is coming, and we’re in crash/correction season after all (September/October).
Meanwhile, Uncle Rus has been having a great old time, behaving far more nicely than SPX’s skittish movements – as if SPX is having a coffee and Red Bull comedown while RUT moves with textbook precision.
Keep scrolling for Fed Wednesday reality check…
SPX Market Briefing:
The charts are painting two very different systematic stories this week.
Current Systematic Status:
- SPX: Bullish momentum fading with decreasing push distances
- RUT: Bearish delivering textbook swing behaviour since month start
- Fed Wednesday: 104% probability of 25bp cut to 4.00-4.25% range
- Seasonal Context: Crash/correction season (Sep/Oct) with winter approaching
The Fed Reality Check:
Bond markets are pricing in virtual certainty (104% probability) that Wednesday brings a 25 basis point cut – the first in nine months. Beyond the rate cut itself, Powell’s press conference will drive risk tone, dollar direction, and the real market movements that matter.
The systematic question isn’t whether they cut (they will), but how Powell signals future moves, addresses tariff risks, or flags labour market softness during the presser.
Chart Analysis:
SPX’s daily action shows classic late-cycle behaviour: struggling higher with diminishing momentum, smaller corrections, and compressed ranges. The moves could be considered far smoother on RUT – almost textbook swing behaviour since we added this at the beginning of the month.
Both the Lazy Popper and Premium Popper setups have been behaving nicely across both indices.
Today’s Systematic Plan:
- SPX: Bullish until proven otherwise, but monitoring momentum deterioration
- RUT: Bearish and executing systematic swings with precision
- Premium Poppers: Waiting for opening bell to fire systematic entries
- Lazy Poppers: Ready for post-open deployment and theta collection
Little to do but wait on both systematic setups and let the Fed Wednesday circus play out while maintaining mechanical discipline.
In Other News…
Tight ranges produce maximum jargon
ES crawled to +0.40% by 9:25 AM like Kash discovering the office coffee machine actually works properly. Overnight high at 6,522, low at 6,476 – ranges tighter than Percy’s grip on his emergency biscuit stash. VIX at 13.0 suggests fear levels somewhere between “mild concern about lunch plans” and “forgot to charge phone overnight.” Liquidity decent but not deep, which is finance-speak for “we’re all here but nobody wants to commit to anything.”
Sector rotation discovers new dance moves
Semiconductors splitting faster than office opinion on thermostat settings – Nvidia steady whilst memory and foundry gain because apparently different types of computer chips have feelings. Software holding on sticky subscription demand because nothing says “business model” like making customers pay forever. Refiners outpacing exploration companies on crack spreads, proving that processing oil beats finding it in today’s economy.
Earnings calendar lighter than Wallie’s workload
Calendar light before Fed meeting because apparently corporate executives discovered the art of staying quiet before monetary policy announcements. Retailers and transports sliding quick guidance updates tied to fuel costs like nervous students submitting homework early. AI infrastructure names flagging “second-half back-end loading” which translates to “trust us bro, we’ll spend the money eventually.”
Cross-asset nuance reaches philosophy degree levels
Rates drifting lower whilst term premium stays sticky because bond markets can’t decide if they trust central bankers or not. Dollar softness helping multinationals and commodities like a weak currency actually benefits someone. Gold’s altitude signals hedging rather than panic – apparently precious metals can read economic tea leaves better than most analysts. Credit markets calm with investment grade tighter because even boring bonds want to feel special.
-Hazel
Expert Insights:
Triple witching events (third Friday of March, June, September, December) create temporary volatility spikes as stock options, index options, and futures expire simultaneously. Friday’s September expiration is now behind us, but the increased volume and position adjustments often leave residual effects into the following week.
Late-cycle momentum divergence between large caps (SPX) and small caps (RUT) often signals underlying market structure shifts. When systematic approaches work better on one index than another, it typically reflects different institutional positioning and flow dynamics.
Fed cut cycles in crash/correction seasons require mechanical discipline over emotional reactions. The cut itself matters less than the systematic response to actual price action following policy implementation.
Rumour Has It…
Breaking from the Financial Nuts newsroom: Percy was spotted rearranging his desk pigeons into “Fed formation” while claiming Wednesday’s rate cut was “totally predicted by enhanced pigeon flight patterns analysing Powell’s jawline tension.”
Hazel immediately began updating her “Wednesday Fed Stress Protocols” while muttering something about “shareholder panic management during monetary policy shifts.”
Mac raised his morning whisky and declared, “My dear chaps, rate cuts are simply the market’s way of acknowledging our superior systematic positioning!”
Kash tried to explain how Fed cuts were “basically like yield farming but with actual central bank yields,” while Wallie just grumbled, “In my day, we didn’t need the Fed to tell us when to trade. Markets spoke for themselves!”
This is entirely made-up satire. Probably!
Breaking scoops courtesy of the Financial Nuts Newswire-because who needs sanity?
Fun Fact:
The Great Bull Market of 2009-2020: The 11-Year Victory Lap
The bull market from March 2009 to March 2020 lasted 11 years and gained over 400%-the longest bull run in U.S. history until COVID-19 crashed the party!
This bull market was so legendary it made every previous bull run look like a casual jog around the block. From March 2009 to March 2020, the S&P 500 went on an 11-year bender that gained over 400%, making millionaires out of anyone who managed not to panic-sell during the occasional 5% dip.
The bull market was so long that entire financial careers were built on nothing but upward trending charts—imagine being a “market expert” whose only experience was watching numbers go up for over a decade! This beast of a bull run survived the European debt crisis, trade wars, Brexit panic, and countless “this time it’s different” predictions.
It created a generation of investors who thought “buy the dip” was a divine commandment and that stonks only go up. The party finally ended when a bat in China reminded everyone that sometimes external events can crash markets faster than you can say “diamond hands.” But hey, for 11 glorious years, being bearish was about as profitable as opening an ice cream shop in Antarctica!
Meme of the Day:
When Fed Wednesday is 104% priced in but you’re still waiting for the opening bell to pop premium
Happy trading,
Phil
Less Brain, More Gain
…and may your trades be smoother than a cashmere codpiece
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