INTRADAY ALERT: Buy the fear. High probability of a +4% to 5% 5 day equity rally post-FOMC (Wed), Led by small-caps.

INTRADAY ALERT: Buy the fear.  High probability of a +4% to 5% 5 day equity rally post-FOMC (Wed),  Led by small-caps.
INTRADAY ALERT: Buy the fear.  High probability of a +4% to 5% 5 day equity rally post-FOMC (Wed),  Led by small-caps.
INTRADAY ALERT: Buy the fear.  High probability of a +4% to 5% 5 day equity rally post-FOMC (Wed),  Led by small-caps.

The wariness of equities into this Wed July FOMC meeting is worse than market reactions in the past year. As we explain below, we now believe there is a high probability (>80%) of a 4% to 5% rally in equities post-FOMC, led by small caps (IWM 1.36% ).

  • Since 2022, the S&P 500 has typically been up slightly into the FOMC meetings (5 days into meeting):
    – since 2022, median gain +0.2% 5D into FOMC,
    – 60% positive (win-ratio)
    – this time, far worse
    – S&P 500 (SPY 0.14% ) -3% (-5% past 1M from the peak)
    – Nasdaq 100 (QQQ 0.04% ) -6% (-10% past 1M from the peak)
    – Russell 2000 flat which is signs of strength
  • There are 6 instances where the S&P 500 was down into the FOMC meeting**:
    – 1/26/22 post-FOMC 5D: +5.5%
    – 9/20/23 post-FOMC 5D: -2.9%
    – 11/1/23 post-FOMC 5D: +3.4%
    – 1/31/24 post-FOMC 5D: +3.1%
    – 5/1/24 post-FOMC 5D: +3.4%
    – **we exclude panic 2022 period of Fed
  • This implies a rally of +3.5% to +5.5%, so for simplicity we see a rally of +4% to +5% post-FOMC rate decision. This is very compelling in our view.

BOTTOM LINE: Expecting a strong rally post-FOMC Wed…

In short, we see a risk-on rally starting Wed that could add +100 points to the S&P 500.

  • We see a bigger rally ensuing for small-cap of +6% or more. Why? Small-caps are far more sensitive to a Fed committing to cuts. This is a well-known relationship, so don’t want to belabor this here
  • We still see this as the “summer of small caps” so our preference is to be buying IWM 1.36%

INTRADAY ALERT: Buy the fear.  High probability of a +4% to 5% 5 day equity rally post-FOMC (Wed),  Led by small-caps.

INTRADAY ALERT: Buy the fear.  High probability of a +4% to 5% 5 day equity rally post-FOMC (Wed),  Led by small-caps.

INTRADAY ALERT: Buy the fear.  High probability of a +4% to 5% 5 day equity rally post-FOMC (Wed),  Led by small-caps.
INTRADAY ALERT: Buy the fear.  High probability of a +4% to 5% 5 day equity rally post-FOMC (Wed),  Led by small-caps.

INTRADAY ALERT: Buy the fear.  High probability of a +4% to 5% 5 day equity rally post-FOMC (Wed),  Led by small-caps.
Source: X.com

INTRADAY ALERT: Buy the fear.  High probability of a +4% to 5% 5 day equity rally post-FOMC (Wed),  Led by small-caps.

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