Last Time Fed Cut 50 bps Was The Start Of The Great Financial Crisis

We will also be discussing Hartnett and his reaction or commentary on the Fed cut, as well as some other items pertinent to it, specifically in the gold environment. Okay. Let’s start with the markets first. The dollar is down seven. I’m sorry, dollars up 17. Off the highs, but still very strong. Ten-year yields are up a basis point at 375. The S&P 500 is 5712, up 13. The VIX is 1643, up 27. Gold is 2624, essentially on the highs of two bucks and change after being down, I think, as much as five bucks on the lows. Silver at 30, spot 73, down 42 cents.

Significant, also about 20 cents off its lows. Copper is down a penny at $429. Gold silver is higher, as you can imagine. WTI is $7252, up to three cents. Natural gas, $247, up a nickel. Bitcoin, $63,432, down 144. But out of that range, between $1561. Ethereum, $2648, up 66, but still weak. Palladium, down 11, at $1051. And Platinum, $962, down 15. Soybean, corn, and wheat are all strong. Wheat is, you can’t see, wheat is up 11 cents at $585. Corn is up 5.5 cents at $396. And soy is up a percentage point, 11 cents at $1040.

So wheat leading the pack and soy bringing up the rare. Quick comment about this silver chart. We discussed it during the Sunday founder’s discussion, and I want to share this with you. During that timeframe, quick comment. The question was raised, how does silver look, generally speaking, amongst the participants? The comment I had made looking at an hourly chart was the following. We were here, and I said, we looked at the MACD, and the MACD hourly was working off being oversold. All right, it was working off being overblood, sorry, right? And the other, and as you went up the ladder, the two hour, the four hour, the daily, it became more and more healthy.

So the hourly looked very bad, the two hour looked semi bad, the three hour looked who cares, no one looks at it, except me, the four hour looked good, the daily looked great. And the comment that was made, and that is holding so far, is I had two levels to be concerned with, meaning if the market needed to sell off to work some of that overboughtness off, as it was showing on the hourly, the first price I had was 3080, which came in around here, alleged, right? So if it held 3080, the hourly could just be digested, be subsumed, and the market can go up again.

The second one was about 3060. Now, we broke that, and that’s pretty bad. The second one came in right around in here, I put, right? And we broke that, but now we’re above it. So overnight trading, I’m not going to say it doesn’t count, but I’m going to say that it’s healthy. I would not expect silver to hold again if it goes below here during the day. However, right now, it has worked off, I’ll stretch this out for you guys a little bit, the over, the working off, the overbought, looks like it may have crested, peaked, and now it’s working its way down.

This would be significant, because then you could see the daily do its thing and the market can go higher. That said, the caveat is, this needs, now we’re looking at the four hour, this needs to turn, okay? Because if this is growing, right, you technical guys, then this is a bear flag. And until that four hour shrinks, this needs to be looked at carefully as a bear flag. Okay. Okay. To the news items, or to the news itself. Homepaid, 1976 politically driven inflation recognition. That was also posted on zero hedge. It’s unlocked. And if you’re a child of the 70s, or if you want, if your dad’s a child of the 70s, you should probably take a look at that because it covers rate cuts, politically driven rate cuts, as the title says.

Pal capitulates. You guys are familiar with that one. Big funds took FOMC profits. We’ll be discussing that. All right. The creepy rate cut. On September 18th, 2007, before the great financial crisis, the Fed cut rates 50 basis points. I’ll read from you. The Federal Reserve cut the largest on a key short-term interest rate by half of a percentage point Tuesday to 4.75 and a bold acknowledgement that the central bank is concerned the mortgage meltdown plaguing Wall Street and Main Street could hurt the economy. Now, they didn’t say that. CNN Money said that. The Fed also indicated that more cuts could be on the way.

Excuse me. News that investors cheered. But it gets better. Now, where did that go? There it is. Later on in that article, they start interviewing Wall Street people. And the quote, I kid you not, quote, we’re having champagne and cookies. Scranka said, this is not a magical elixir that solves our subprime problems overnight. But it is a big step in the right direction to keep the economy growing. The Fed is sending a strong message that it won’t get behind the curve. We’re having champagne and cookies. Are you joking? And incredulous aside at the statement, the Fed won’t get behind the curve.

If you take the champagne and cookies point out, it’s almost like this person is saying what Powell said at the podium. What were the effects or aftermath of that rate cut? 50 basis points. September 18th, exactly. What is that? September 7 to 24? What’s that? 17 years later? 17 years earlier, September 18th, 50 basis point cut, big rally, rallies for a couple weeks afterwards, and then whoosh, it’s over. That’s the beginning of a great financial crisis. Let’s zoom out a little bit. During that time frame, the S&P 500 went from here to here, and gold went from here, volatile, but to here.

So basically, higher, back to unchanged, and then working its way higher again. Okay, so it’s a creepy parallel. Sorry, and I won’t take credit for it. I don’t know his name on social media, except that he’s on Substack, not your advisor. He’s an ex-NYU grad. He’s a trader, 25 years, man after my own heart, as a New Yorker, and an actual person who traded in New York markets. Anyway, credit to him. I just threw a couple of charts up there and did a little digging afterwards. Moving on. There are a couple things that we covered over the weekend, and there are other stories as well, but I think these are relevant.

Hartnett waits, Hartnett weighs in. Hartnett, the 50 basis point, panic cut. Wall Street loves panic cuts when there’s no panic, Hartnett says. Powell’s cut was to rescue the small businessmen and prevent them from too many layoffs. No other reason makes sense to him. Hence our title. There is, and this is now I’m quoting Hartnett again, there is a good chance inflation will mutate from Wall Street to Main Street again. And here’s a chart that we kind of marked up there. There’s a crisis after every one of these circles. There’s no crisis here, at least not yet.

So he’s getting ahead of something or he’s politically motivated. Those are the two things. I want to trust him, but I can’t because his logic at the podium made no sense. Commitment of traders analysis. We had an extended, this is a very wonky thing, so I’ll just give you the bullet points. Big funds took FOMC profits after the Fed announcement. Now banks are at their all time high short positions with open interest, not near its all time highs yet. Banks continue to show almost no option exposure. Net fund positions also are now over 55% of total OI, which is higher than the COVID peak.

Pretty significant. Here’s the five days in question. By the way, bank shorts, if you’re cheering their losses, the market rallied like another 50 bucks after the COT report. So they’re down between one and one and one and a half billion dollars. David Lee, I think, alerted me to that. Final story, again, related to that. At 4 p.m. after the Fed announcement and GLD’s close and after the market had washed out on Fed Day, you know, new highs and washed out, profit taking. A significant chunk of gold 3000 calls traded OTC, and we put it in context in a mini pod.

So we caught this and threw it up. Again, that may have also come from someone else. I forget now, but we did a lot of follow up on it. All right, moving on. So those are three news items. In the market news itself, you could just read these stories yourself. But there seems to be an overwhelming mention of chip manufacturing. There’s one that I don’t have in there. Apple is making chips locally. You’ve got Intel. People are investing in Intel. They’re not going to let Intel go bankrupt. You know, we’re going to be building chips in the UAE.

So that’ll help their region, but at the same time, help our economy. That’s all part of cross pollination. There’s there’s. You’re going to see these are real stories. You’re also going to see a lot of coming to the election because it’s going to promote build back better or whatever he’s calling it politics geopolitics. Government shutdown circus is about to begin. Get ready for it. Here we go. It happens every year. Data on deck. The data on deck will be inflationary focused now. So is inflation reemerging? And it’s probably going to be reemerging. The other focus, it’s a minor focus, but it’ll be there will be will be if economic data is really, really weak.

Then the market will start to want another 25 basis point cut. So just keep that in mind. That’s the market’s expectations. Going back to things. Let’s throw gold up. The daily up. I mean, after last week, how can you how can you not have a retracement? And we’re not. I think the takeaway from this morning’s activity, especially last night, gold’s up, you know, two bucks. The dollar was up 40. Right. Put that up there. The dollar was up 40 last night on the highs. And gold was down like three, four bucks and silver was down 60, 80 cents.

And I think the silver market is, again, being sold on the back of dollar. But gold, gold mine, no one’s going to sell gold until the events are over, which should make you be aware that something could happen when the events are over. And that’ll be a dip to buy if you’re a fundamentalist in the gold market. So in the meantime, silver lower is a gift. Less copper cracks. I don’t see why silver is 40 cents lower, except so someone else can buy it. All right. That’s it. I’m Vince. Have a great day. Call us at 833-326-4653.

And as always, thanks for watching. Please note that this video is not intended as legal, licensed financial trading advice and is to be used for informational purposes only. Please contact your financial advisor before making any decisions. And thanks for watching. Thank you. [tr:trw].

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