Fed Cuts Rates 0.5%. What's Next for Stocks?

Summary

In this video, the Federal Reserve's first interest rate cut in four years is discussed, which was larger than expected at 50 basis points. The market initially fell but rebounded the next day, reflecting the positive sentiment towards the rate cut. The video explains the historical impact of rate cuts on the market and the current economic indicators suggesting a strong economy. It also highlights sectors like small-cap companies and consumer discretionary that could benefit from lower interest rates. The presenter advises staying invested in quality stocks despite short-term market volatility and provides technical analysis insights, including moving averages to gauge market trends.

Takeaways

• 📉 The Federal Reserve made its first interest rate cut in 4 years, reducing rates by 50 basis points, which was larger than the 25 basis points most banks anticipated.
• 📈 Despite initial market decline post-announcement, stocks rebounded strongly the following day, indicating market approval of the rate cut.
• 💹 The Federal Reserve's action was anticipated by the CME Futures Market, which had a 60% probability prediction of a 50 basis points cut.
• 🔽 The Federal Reserve's rate cut from 5.5% to 5% is still considered restrictive given the current inflation rate of around 2.5%.
• ⏳ The Federal Reserve aims to lower the rate to approximately 3% over the next couple of years, with further cuts expected by the end of this year.
• 💰 Lower interest rates are beneficial for dividend stocks and could lead to a bullish stock market, contrary to some expectations of market drops following rate cuts.
• 📊 Historically, the market's reaction to rate cuts depends on the economic environment; cuts during strong economies tend to boost markets, unlike those during recessions.
• 🚫 The speaker advises against trying to time the market based on short-term macroeconomic news, emphasizing the importance of staying invested in quality stocks.
• 📊 The speaker predicts that if the economy continues to grow, the stock market could potentially rise by 15% in the next 12 months, but a recession could reverse this trend.
• 📈 The speaker remains bullish for the next 6 to 12 months, identifying small-cap companies and consumer discretionary stocks as sectors that could outperform the market.

Q & A

What was the Federal Reserve's first interest rate cut in 4 years?

The Federal Reserve made their first interest rate cut in 4 years by 50 basis points or 0.5%, which was larger than the 25 basis points that most banks expected.

How did the market initially react to the Federal Reserve's interest rate cut?

Initially, after the interest rate cut, the market went down, possibly due to fears of a market crash reminiscent of the last time the Fed cut rates.

What was the Federal Reserve's target for the Federal funds rate in the short term?

The Federal Reserve aimed to bring the Federal funds rate down to about 3%, which was expected to take about one or two years, depending on incoming data.

Why is a lower interest rate generally considered bullish for stocks?

Lower interest rates can be bullish for stocks because they reduce borrowing costs for companies, which can fuel business expansion, and also make dividend stocks and bonds more attractive relative to savings accounts, leading to increased investment in these assets.

What is the significance of the 50 and 150 moving averages in determining market trends?

The 50 and 150 moving averages are used in technical analysis to determine market trends. A bull market is indicated when the 50 moving average is above the 150 moving average and both are sloping upwards. Conversely, a bear market is suggested when the 50 moving average crosses below the 150 moving average and both start to slope downwards.

How does a weaker US dollar impact companies in the S&P 500?

A weaker US dollar benefits companies in the S&P 500 as it makes their products and services more competitive and cheaper in foreign markets, potentially increasing exports. Additionally, multinational companies can convert foreign earnings into more US dollars, boosting their revenues and profits.

What is the difference between the Federal Reserve cutting rates due to a recession versus normalizing interest rates?

When the Federal Reserve cuts rates due to a recession, it's an attempt to stimulate the economy and prevent a market crash. In contrast, normalizing interest rates is done when the economy is strong and the previous rate increases were due to high inflation. Normalizing rates is seen as bullish for the stock market.

What are the potential outcomes for the stock market in the next 12 months according to the script?

The potential outcomes for the stock market in the next 12 months are either a rise of about 15% if the economy continues to grow, or a drop of 15% if the economy goes into a recession. The actual outcome depends on the state of the economy and cannot be predicted with certainty.

Why might small to medium-sized companies benefit more from lower interest rates?

Small to medium-sized companies typically have more debt and less cash on their balance sheets compared to larger companies. Lower interest rates can reduce their borrowing costs, making it easier for them to finance growth and operations, which can lead to outperformance in the market.

What is the significance of the bull trap pattern mentioned in the script?

A bull trap pattern in the market indicates a false signal of a new uptrend. If the market closes below a recent high after making a new intraday high, it could suggest that the uptrend is not sustainable and the market may drop back down to previous support levels like the 50 or 100 moving averages.

Outlines

00:00

📉 Fed's Unexpected Interest Rate Cut

The Federal Reserve made an unexpected interest rate cut of 50 basis points, which was larger than the anticipated 25 basis points. This decision led to initial market confusion, with a temporary dip, but the market rebounded significantly the next day as investors realized the potential benefits of lower rates. The cut was from 5.5% to 5%, which is still considered restrictive given the current inflation rates. The Fed's goal is to further reduce rates to around 3% over the next couple of years, which could impact savings but is beneficial for the stock market, especially dividend stocks.

05:02

📈 Market Reaction and Investing Strategy

Despite initial market downturn post-rate cut, the subsequent market uptick reflected a positive reception of the rate cut. The video emphasizes the importance of staying invested in quality stocks through market fluctuations, rather than trying to time the market, which often leads to missing out on the best days. The speaker shares personal investment gains to illustrate the point and discusses the potential for stocks to rise or fall depending on economic conditions, urging viewers to learn from market mistakes and focus on long-term investment strategies.

10:03

🌐 Economic Indicators and Market Trends

The speaker discusses various economic indicators, including GDP growth forecasts and sector-specific recessions, to assess the overall health of the economy. They mention that while certain industries might be in recession, the overall economy shows strength. The Federal Reserve's rate cuts are expected to boost sectors like auto sales and housing. Earnings per share forecasts are also highlighted as a positive sign for the market's future, with expectations of growth in the coming years, suggesting that stock prices should continue to rise.

15:06

💹 Market Valuation and Sector Performance

The video analyzes the market's valuation using price-to-earnings (PE) ratios and price-to-earnings-to-growth (PEG) ratios, concluding that the market is fairly priced and not in a bubble. The speaker predicts that small to medium-sized companies and consumer discretionary stocks are likely to outperform the market in the coming months as interest rates decrease. They also provide a short-term market outlook, suggesting caution due to seasonal trends and technical analysis, but remain bullish for the medium to long term.

20:08

📊 Technical Analysis and Market Outlook

The speaker provides a technical analysis lesson on using moving averages to determine market trends, highlighting the significance of the 50-day and 150-day moving averages. They discuss the current bull market, indicated by the 50-day average above the 150-day, and provide a historical perspective on market trends. The video also discusses potential short-term market patterns, such as a bull trap, and the importance of watching for certain price levels to determine the market's next move. The speaker expresses optimism for a strong market rally by the end of the year.

25:11

🚀 Final Thoughts on Market Behavior

In the concluding part, the speaker reiterates the importance of staying invested in high-quality companies and provides a brief overview of the services offered, including online courses and a live wealth academy program. They encourage viewers to subscribe for updates and utilize the provided resources to learn more about investing and trading in the financial markets.

Keywords

💡Interest Rate Cut

An interest rate cut refers to a central bank's decision to reduce the interest rates at which it lends money to commercial banks. In the video, the Federal Reserve's decision to cut interest rates by 50 basis points is a significant event as it's their first cut in four years and is larger than what most banks expected. This action is analyzed for its potential impact on the markets, suggesting that it could stimulate economic activity by reducing borrowing costs.

💡Basis Points

A basis point is a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equivalent to 0.01% or 1/100th of a percent. In the context of the video, the Federal Reserve's decision to cut interest rates by 50 basis points is discussed, which is a substantial move indicating a significant adjustment in monetary policy.

💡Futures Market

The futures market is a financial market where contracts to buy or sell an asset at a predetermined price at a specified time in the future are traded. In the video, the CME Futures Market is mentioned, where there was a 60% probability of a 50 basis points rate cut, indicating how traders use this market to speculate on and predict future movements in interest rates.

💡Market Reaction

Market reaction refers to the change in the price of securities, currencies, or commodities in response to new information, economic indicators, or policy changes. The video discusses the initial market reaction to the interest rate cut, where it initially went down, possibly due to historical associations with rate cuts and economic downturns, but then recovered as investors realized the potential positive implications of lower borrowing costs.

💡Federal Funds Rate

The Federal Funds Rate is the interest rate at which depository institutions lend balances to other banks overnight. It serves as a key monetary policy tool for the Federal Reserve. The video explains that the rate was cut from 5.5% to 5%, and the historical context is provided to show that this rate is still relatively high compared to current inflation levels.

💡Inflation

Inflation is the rate at which the general level of prices for goods and services is rising, and subsequently, the purchasing power of currency is falling. In the video, the narrator discusses how inflation has come back down to about 2.5%, which influences the Federal Reserve's decision to adjust interest rates to maintain a balance between economic growth and price stability.

💡Dividend Stocks

Dividend stocks are shares of companies that pay out a portion of their earnings to shareholders in the form of dividends. The video suggests that lower interest rates can be good news for dividend stocks, as they may become more attractive to investors seeking yield in a low-rate environment, leading to potential increases in their stock prices.

💡Bullish

Bullish refers to a prediction or attitude that the price of a security or the overall market will rise. In the video, the term is used to describe the positive outlook for stocks following the interest rate cut, as lower borrowing costs can stimulate investment and economic growth.

💡Recession

A recession is a significant decline in economic activity that lasts more than a few months, typically visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The video discusses the unpredictability of recessions and how the Federal Reserve's rate cuts can be a response to economic weakness or an attempt to normalize rates during strong economic periods.

💡Moving Averages

Moving averages are technical analysis tools that help smooth out price data to show longer-term trends or cycles. In the video, the 50-day and 150-day moving averages are used to identify trends in the market. The script explains that a bull market is indicated when the 50-day moving average is above the 150-day moving average and both are sloping upwards.

💡Consumer Discretionary

Consumer discretionary refers to goods and services purchased by consumers in their free discretion, as opposed to necessities. The video suggests that the consumer discretionary sector tends to outperform the market following interest rate cuts, as these companies may benefit from increased consumer spending due to lower borrowing costs and a stimulated economy.

Highlights

The Federal Reserve made their first interest rate cut in 4 years.

Interest rates were cut by 50 basis points, which was larger than most banks expected.

The CME Futures Market indicated a 60% probability of a 50 basis points cut.

The market initially dropped after the rate cut, possibly due to historical associations with market crashes.

The market rebounded the next day, recognizing the positive impact of lower interest rates.

The Federal Reserve's goal is to bring the rate down to about 3% over the next couple of years.

Lower interest rates are beneficial for dividend stocks and bonds.

The impact of interest rate cuts on the stock market depends on the economic environment.

The Federal Reserve may cut rates to normalize them rather than to save a recessionary economy.

Staying invested in the market is crucial, as trying to time it can lead to missing out on gains.

Shorting the market during a bull market is risky and can lead to significant losses.

Weakening of the US dollar can benefit US companies, making their products more competitive abroad.

Lower interest rates can fuel business expansion due to cheaper borrowing costs.

The stock market's performance after rate cuts depends on the economy's health.

Earnings per share forecasts indicate expected growth, suggesting the market is not overvalued.

Small to medium-sized companies with more debt may outperform as interest rates decrease.

Consumer discretionary stocks may rebound strongly as rates come down.

Technical analysis using moving averages can help identify market trends.

The market's reaction to the rate cut suggests a potential for a strong rally by the end of the year.

Transcripts

so on Wednesday the Federal Reserve

finally made their first interest rate

cut in 4 years and they cut interest

rates by 50 basis points or 5% a lot

larger than what most banks expected so

what does it mean for the markets and

for you let's find out in this

[Music]

video so as we all expected the FED

finally cut interest rates and most

banks actually predicted that they'll

cut by 25 basis points but if you look

at the Futures Market the CME Futures

Market there was a 60% probability they

will cut by 50 basis points or 0.5% so

the fact that they cut by that amount uh

most Market participants actually

expected it now what's interesting is

that initially after the cut the market

didn't go up the market went down

initially maybe people were thinking oh

the last time the FED cut rates the

market crash oh right and it sold

everything okay but the next day the

market rough back and the market had a

huge gap up because people are now

thinking wait a minute cut rates good

right they started buying like crazy

okay now so bear in mind that they cut

rates from

5.5% which is the high end of the range

to 5% So based on history the F funds

rate is still relatively

High given that inflation has now come

back down to about 2 .5% going towards

2% a Fed funds rate of 5% is still very

restrictive so the eventual goal for the

FED is to bring the rate down to about

3% and that will take about one or two

years depending on uh the incoming data

right so understand that the end goal

right now for the fed and again this

could change any time but the end goal

right now for the FED is by the end of

this year they're going to have two more

rate cuts of 25 basis Points each .25%

each and the the the range of the rates

will come down to 4.5% by the end of

this year and by the end of next year

you'll come down to

3.5% and then eventually by 2026 it it

should go down to 3% with r coming down

this is not very good news if you have a

lot of your money in the savings account

or time deposit account your interest

will be dropping but this is very good

news if you have been buying dividend

stocks and reads they have come roaring

back with lower interest rates and this

is actually very bullish for stocks as

well now again people get very confused

because they read in some places that

when the FED Cuts rates stocks drop then

they read another article that says when

stocks when when the FED Cuts rates

stocks goes up so you know which is

correct and the answer is they are both

correct it depends on the environment in

which the FED Cuts rates in so in other

words if you look at history every time

the FED Cuts rates because the economy

is in a recession they cut rates to save

the economy then that is related to a

market crash but at the same time they

also many instances in the past when the

FED cut rates when the market was at an

all-time high like now the FED cut rates

when the economy is still very strong so

in those situations they cut rates not

to save the economy but to

normalize the interest rates because

when they took the interest rates from

uh 0o to 5% that was abnormal because of

high inflation but now they normalizing

interest rates and that is very bullish

for the stock market specifically

certain sectors moving forward as I've

spoken about and that's why the market

realized that the morning after and

that's why stocks came roaring back okay

and I did a post on it on my social

media pages and I said you know this is

why it's so important to stay invested

in the markets and in high quality

stocks and not be scared Away by all

kinds of short-term macroeconomic news

when people say oh when the FED Cuts

rates the market will crash when

recession is coming there's inverted Yi

curve the Yi curve is uninverted there's

a rising unemployment rate elections are

coming blah blah blah and when people

listen to all these narratives they get

very very nervous and so a lot of people

when they first saw that the market came

down on Wednesday they freaked out and

they sold their stocks or wor they

shorted the market and the next day when

the market came back they missed out on

those gains in your portfolio or huge

losses when they shorted the market so I

did a screenshot of my account just to

show my students I say you know what in

one day in that one day my account is up

like about total

$150,000 in one day now the point to

show them that is to say that you never

know you never know when those big up

days will come when those very bullish

days could come and that's why it's

really important to stay invested in the

markets the trouble is that when you try

to predict the market like oh crash is

coming uh so I better sell first and

then after the crash I buy back and the

trouble of doing that is that by trying

to avoid the worst days you invariably

miss the best days in a market and I've

shown This research before that over a

10 to 20 year period if you just missed

the best five days in the market you

were out of the market or you shter the

market that would significantly reduce

your results in the long run and that's

one of the things I've learned investing

for so many years is that don't try to

predict the market don't try to outsmart

the market just stay invested into the

market in good quality stocks right

through the ups and downs and you will

outperform everyone else very very

easily I got a feeling that some people

lost a lot of money you know shorting

the market on that day and how do I know

because I got some really nasty comments

by some people so a tongue and cheek I

kind of like posted this on my social

media page I just said you know bye-bye

B you know something innocent and some

people got really upset this guy called

CH I don't know if that's how you

pronounce it right he said good for you

you will regrets on laughing on people

shorting the markets did I did I laugh

at people I didn't laugh at people all I

said was bye-bye B right I swear to God

and I believe it you'll pay it off just

keep showing your

fortunes you know so I I I replied

to you know instead of getting angry at

the markets learn how to invest

successfully at panits decom uh and you

can also learn how I invest by watching

my live buy and sell alerts at

inside.of.my at the markets or getting

angry at at other people you know the

whole thing is that learn from your

mistakes and that's how you become a

better investor and Trader and I can

tell you that

what this guy CH is going through is

exactly what I went through in my early

days yes in my early days as a young

investor and Trader I did this stupid

I shorted the market because I

predicted all the market will come down

because of this economic indicator

because this expert say the market will

go down and I shorted the market many

times in the past and I got whacked and

I lost so much money and one of the

things that I learned that the valuable

lesson is never short the market when

the Market is in a boo Market you know

how do you know it's a boo Market very

simple when the the market is above the

200 day moving average and the 200 day

is sloping up that's a freaking bull

market okay when the 50 moving average

is above the 150 moving average and they

both sloping up that's a freaking boom

market so when you short the market or

the markets in a boom Market it's like

pissing Against the Wind you're going to

get a face full of urine I know some

people like golden showers but this is

not the way to do it so what to happen

to the stock market after the FED first

Cuts interest rates again like I said

earlier on it depends on how the economy

holds up if the economy continues to

grow like it is right now then rate cuts

are very bullish for the economy for a

few reasons number one you may notice

that as the FED has been cutting rates

or long-term rates come down the US

dollar has been weakening when the US

dollar weakens that's very good for

companies in the S&P 500 why so there

are two reasons number one when the US

dollar is weaker uh these us companies

their products and services will look

more competitive and cheaper to foreign

markets so they'll buy the foreign

markets will import or buy more us Goods

because they are cheaper in terms of uh

US Dollar conversion number two if you

look at companies like again a

McDonald's or an apple they make money

from all around the world and when they

bring the money back to the US market

when the US dollar is weaker the foreign

currency will create more US dollar so

that increases the revenue and the

profits of these multinational companies

so in other words remember this weaker

US dollar good for us companies okay so

that's the first reason second reason is

that when rates come down then companies

are able to uh Finance their businesses

at a lower rate they can borrow cheaper

and that fuels expansion business

expansion and again that's good for uh

the companies and the markets so again

as long as the economy holds up we can

expect that in the next 12 months the

stock market could uh potentially go up

another 15% in the next 12 months

however if for whatever reason the

economy goes into a recession and of

course stocks will go down and 12 months

from now stocks could be 15% lower so it

all depends

will we be in a recession now

unfortunately unfortunately no one can

predict it not the top Economist in the

world not Warren Buffett not me not no

one can predict when a recession happens

and usually a recession is officially

declared way after it has started so

there's no way to predict it right but

the only thing that you can do I guess

is to watch the price action of the

market as long as the market is making

higher highs and higher lows and the 50

moving average is above the 150 moving

average that means the Boom Market is

very very well intact but once the 50

moving average crosses below the 150

moving average and they start sloping

down then that could be a sign that we

are going into a bare Market which I

doubt will happen but again everything

is possible now if you're not sure

what's the 50 and 150 moving average

I'll talk more about it when I show the

charts in a while yeah now more

specifically if we take a look at the

next 3 months the next 6 months and 9

months and and 12 months what happened

in the past

when the FED cut rates and the US

economy uh stayed strong all right so

three month this these were all the

previous years when the FED cut rates to

normalize and not to because of

recession you can see 3 months after on

average the Market's up

10% uh 6 months later it's up 12% 9

months later it's up 14% And 12 months

later it's up 15% now while we can't

predict a recession with absolute

certainty we can look at certain

coincident indicators to get a feel of

how the economy is doing right now and

the first thing that we can look at is

the current uh Atlanta fed GDP now real

GDP growth estimates that tracks GDP in

real time so as of now the

GDP forecast for quarter tree of this

year is at

2.9% growth which is still very very

strong so remember people were initially

freaking out because what happened was

that in quarter four of last year and

quarter one of this year GDP decelerated

and people think oh my God we're going

to go into a recession then in quarter

two of this year we had a sudden

acceleration of GDP surprising everyone

at 3% growth in quarter 2 and again now

quarter three which is yet to report

officially is as of now at 2.9% so for

now it looks like the economy is still

pretty strong now bear in mind that the

economy is made up of many different

sectors and industries and yes there are

certain industries that are in recession

for example durable goods are in

recession Auto Sales are in recession

the housing market is in a recession so

there are pockets of the industries that

are in recession but we're not in an

overall Market wide or economic wide

recession where everything is

Contracting only those few Industries

and once the FED Cuts rates which is

what they did we should expect Auto

Sales and housing sales to start to

rebound and recover because those are

the most rate sensitive parts of the

market the next coincident and leading

indicator we can look at to determine

whether we are you know going to

recession or not is to look at earnings

per share

uh forecast by companies companies will

always give forecast of where they

expect their earnings to be in the next

12 months or the next you know 20 four

months and of course analyst would study

and compile uh these projections by

companies so for now you can see um this

is from briefing.com for this year which

is

2024 the current S&P 500 earnings per

share estimate is $240 55 so this is

where we are right now that is how much

each share of the S&P is earning now for

next year calendar year 2025 you can see

that earnings per share is expected to

come in at

$276 which is a growth all right and in

2026 earnings per share is looking to

come in at

$311 which again is a growth above

2025 so in other words the next one to

two years we do expect companies to earn

more in terms of their earnings per

share and they earn more they'll be

worth more so stock prices should

continue going up now some people would

argue that the stock market looks really

in a bubble right now it's really

expensive well if you look at the data

not really and there are two things you

can look at number

one if you look

at the past from

1950 uh to 2019 so that's a good uh 70

well 69 years right you can see that

whenever inflation was less than 2.5%

which is where we are now the average PE

ratio of the S&P 500 is 21 times now

guess what's the PE ratio of the S&P now

it's 21 times so in other words based on

history the Market's not expensive but

not the Market's not cheap either it is

fairly

priced another thing you can look at is

the pack ratio of the market that p

ratio or PEG ratio is the PE Ratio

divided by the earnings growth rate okay

and you can see the S&P 500 forward pack

ratio uh for the last 10 years and the

average has been

1.5 and guess where we are now we are

now at

1.49 which is below the 10year pack

ratio mean So based on the pack ratio

the market is not expensive as well all

right so in a nutshell I remain bullish

for the next 6 to 12 months and

specifically which Industries should

outperform the market and I talked about

this in my last video so just to

reinforce what I said number one as

interest rates come down uh small to

medium-sized companies that have more

debt on their balance sheet and less

cash compared to large companies they

should benefit the most and you can see

that ever since the pandemic you see

way before the pandemic happened small

companies small caps used to outperform

large companies because small companies

if you think about it they should grow

faster than big companies since they're

still small right but ever since covid

and ever since the fat rais interest

rates aggressively small companies that

have more debt have suffered and as a

result the

iwm which is the small cap ETF

in uh blue blue sorry not blue in this

is it magenta this color right magenta

you can see that it has

underperformed the S&P 500 ETF which is

made of large companies so as rates come

down I do expect that small companies

small cap ETF the iwm or the vbk either

one I'm personally invested in the vbk I

think that this should play some catchup

to the S&P 500 again there's no

guarantees in life but uh I think

there's a pretty high chance that could

happen the other thing I mentioned in

the last video is I said that consumer

discretionary historically has always

outperformed the market but in the last

two years they have underperformed the

market and if you look at history once

the FED Cuts interest rates consumer

discretionary tends to have the highest

outperformance out of all the sectors

uh uh from the First Rate cut and that's

why I mentioned that there are a lot of

consumer discretionary stocks that are

still very attractive value that could

rebound pretty strongly one once we move

forward companies like your you know

Amazon by the way Amazon is actually

under consumer discretionary companies

like your Lululemon companies like your

Nike you right they could come back

pretty strongly once this happens and

sure enough you can see that in the last

one week the market has reacted to the

fat cut and consumer cyclical which is

discretionary same thing is the third

strongest performer so it looks like it

is rebounding now although I do remain

bullish in the next uh 6 to 12 months

the medium and of course the long term

but in the very short term in the next

two weeks I'm getting a bit cautious in

fact if you're in my private Community

My ultimate invest Playbook you know

that in the last few days I actually

closed many of my short-term option

trades to

profit uh because I think the next two

weeks could be a bit choppy for a few

reasons number one seasonality so if you

look at past September now usually as

you know September is a bearish month

right I've said that many times before

and the last four septembers were all

bearish so will this 5th September be

bearish again who knows it's a 50/50

coin flip but if you look at past

septembers you can see that the worst

part of the month is actually in the

last two weeks the last last two weeks

tends to be the most bearish and this

chart comes from fun strap that's that's

the source right so uh so this combined

with some of the technical patterns

which I'm going to show you in a while

makes me a bit cautious in the next two

weeks so what I've done is again the

last few days when the market was going

up I was closing many of my option

trades to take profit take profit take

profit take money off the table uh so

that the next two weeks if the market

drops again yes I'm going to reenter

many of these trades many of them are

boot put spreads or cash secure puts but

of course for my long-term Investments I

don't sell them right I don't predict

the market I just stay invested and if

the market is willing to offer me a good

price by dropping in a in a very short

term the next two weeks or the next

three weeks I'll be happy to to add more

shares as well because I still do expect

that by the end of

October uh early November we should see

a very strong rally in the markets as we

always do most of the time during an

election year regardless of who wins

although I do think that you know Harris

looks at to win this election before

their debates I gave Trump a 90% chance

of winning but after the debate and

Trump was like you're eating the dogs

you're eating the

CID okay all right after that I said

okay I think Harris uh is going to win

right I give a 70% probability to Harris

winning and then a couple weeks later

when Trump went ballistic I hate Taylor

Swift I said okay the old man's gone all

right so now I'm giving Harris a 90%

chance of winning will I be right I

don't know right but I'm rarely ever

wrong so finally let's take a look at

the charts now for those of you who are

new to technical analysis and you're not

sure about how to use moving averages

here's a very quick lesson so just

remember that this blue line is the 50

moving average this green line is the

150 moving average as long as the blue

line is above the green line we are on a

clear bullish

uptrend or if the price of the market is

above the 200 day moving average which

is the red line and the 200 sloping up

that is also a sign or an indication

where in a boom Market okay a bare

Market or a downtrend is confirmed only

if only if the Blue Line the 50 moving

average crosses below the 150 moving

average and they both start to flatten

or slope down that is a downtrend

bearish signal so we are far from that

the 50 is above the 150 the two round

sloping up the uptrend is very very

strong the boom Market is very much

intact now if you go back in history

let's go back uh 5 years for example by

the way you have to look at Daily

candles uh for this technique right so

if you go

back uh to 20

22 you can see what happened over here

and again can you see that this is a

bull market right this is a bare Market

or

downtrend right and this is a bull

market so at this point of Time how did

you know when the boom Market revers

into a bare Market very simple look at

the blue and green lines which I just

mentioned when the 50 moving average the

blue line right when a blue line when a

blue line crosses below the green line

and they are both flattened or sloping

down so you can see the blue is sloping

down you see the blue sloping down the

Blue Line sloping down the green has

flattened and slop down and once they

cross over that is the uh sign or that

is the signal that this boom Market over

here has reversed into a bare

market and same thing how do you know

when a bare Market reverses back into a

boom Market when the Blue Line crosses

back above the green line and they start

to slope up so over here you can see

which I've taught many times before when

the Blue Line crosses above the green

line and they are both sloping upwards

that is a bull market signal and that is

a sign that we're in a new boom Market

all right so right now as you can see we

are clearly in a bull market um now if

you look at the price action you can see

that we made a high in the market

sometime in July right and we pulled

back and then we went up we never

exceeded that high right we made a lower

high it went down but this time we have

actually made a new high the market has

broken Above This high and we have made

a new intraday high of

5733 now the thing to understand is that

if in the next uh in the next one to two

days if the market closes below this

High which is 5669 right if the market

Market happens to close reverse and

close

bearish and close below this level this

is what we call a bull trap pattern

right it's called bull trap pattern

which Elson talks a lot about in his

price action manipulation cost so in a a

bull trp pattern we could expect the

market to come back down again to the 50

moving average or even the 100 moving

average before the rally at the end of

the year brings it back up again so that

is one scenario so I'm watching the next

one to two days very closely to see that

hey is it going to close back below this

High all right however in the next few

days if we can stay above this level if

the market can't break below this then

this is a very strong breakout pattern

that should take us all the way up okay

but again it doesn't go on a straight

line we could we would still see some

ups and downs along the way but this uh

swing High here would now act as a level

of support for the market so it's really

interesting to see how this whole thing

plays out and as always May the markets

be with you stay safe stay invested in

high quality companies and I'll see you

guys in the next video if you want to

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is Adam coup and may the markets be with

you