FED Cuts; Markets Pop & Drop

The U.S. Federal Reserve cut their interest rate by 0.5% today, the equivalent of two cuts all at once, are now back down to a target range between 1%-1.25%, and made the first inter-meeting action since December 2008 - during the financial crisis. The market initially popped on the news, yippee, and then it sold off quite a bit. But, wait a minute. The rate cuts are supposed to boost the market, right? (Eventually it might for a while). Oh, you say, but traders sold because the move was widely expected? Buy on the rumor, sell the fact? Hmm.

According to Steve Leisman of CNBC, the move was intended to 'shock' markets. Is that why they ended lower?

So, nothing has changed with the chart of the ES futures, other than to change the time scale, below, which we are changing to the 4-hr chart.

ES Futures - 4 Hr - Some or All of 2

As you can see from the Fibonacci ruler shown, the up move reached the 50% retrace level. This means it has, already, qualified as a retrace that can have a 1.618 wave to the down-side following it.

The up move looks shorter time-wise than the down wave, but the EWO has come back to the zero line - which is all it needed to do. Accordingly, we are saying this wave could be "some or all of 2". Given the number of styles of corrections, we must watch for further development. While we are, we will remind you of some of the most common kinds of corrections for second wave: zigzag, or multiple zigzag, flat, expanded flat, flat-x-zigzag, or flat-x-triangle.

We will remind you that wave 2 can never be a triangle in it's entirety.

So far, the up move has been orderly. It 'can' be counted as the expanding diagonal a wave we cited yesterday, but we also have a sneaking suspicion it can be counted as a three-wave sequence. Accordingly, the wave label at this stage can be a, a-3 or 2.

Remember, if this up wave is an a-3 wave move, then for an Flat, the b-3 wave down must reach the 90% level of the wave 1 bottom by Elliott wave 'rule'.

We will better label this wave as more information about its nature comes in. We have a sneaking suspicion that in addition to the 'grinding up wave' that you see above, there might at some point come a "see your creator wave" near the end of the move - one that will convince you that we are going over the top again.

Until then, we did a decent job today counting some intraday waves. We had fun and hope you enjoyed it.

Have a good start to your evening.

TraderJoe