Part 4: Stocks Will Hold Up a Week of Two More, Then Look Out

As I’ve noted over the last week, the markets are entering a “risk on” period.

What do I mean by “risk on”? Stocks and other risk assets rally.

Yesterday I noted that the drivers behind this move were:

  1. The fact that President Trump reached out to the CEOs of the largest banks in the U.S. during last week’s sell-off.
  2. Hype and hope of a potential “cease fire” between the U.S. and China regarding their trade war.
  3. The Trump administration “dangling the carrot” of a potential capital gains or payroll tax cut.

Having outlined the drivers behind this “risk on” move for most of the last week, yesterday we began to assess the reason this move will end.

That reason is simple: the Fed is going to disappoint the markets.

The Reluctant Fed Doesn’t Want to Cut Rates More

On Wednesday, the Fed released the minutes from its July 31 meeting: the one where it cut rates by just 0.25% after considerable political pressure from the President.

The minutes reveal that the decision to cut rates was highly conflicted, with multiple Fed members believing the move wasn’t warranted.

This view hasn’t changed since July either.

The Fed is currently staging its annual Jackson Hole meeting. Yesterday, three Fed officials told CNBC that they didn’t believe the Fed should have cut rates.

“As I look at where the economy is, it’s not yet time, I’m not ready, to provide more accommodation to the economy without seeing an outlook that suggests the economy is getting weaker,” said Kansas City Fed President Esther George.

Philadelphia Fed President Patrick Harker followed up saying he voted to cut rates “reluctantly…I think we should stay here for a while and see how things play out.”

Then came Dallas Fed President Robert Kaplan who would “… like to avoid having to take further action.”

Put simply, the Fed is not about to embark on a series of interest rate cuts.

Meanwhile, the stock market believes the Fed is about to start a MAJOR cycle of moentary easing. The current data shows that investors think there is a 98% chance of the Fed cutting rates in September and another 65% chance of the Fed cutting rates again in October.

So we’ve got stock market participants who are almost 100% certain the Fed will cut rates again and again… at a time when the Fed itself isn’t interested in cutting rates at all.

Bottom Line: The September Fed Meeting Will Disappoint

The Fed’s next meeting takes place September 17-18. Based on what the Fed revealed this week, the odds of the Fed cutting rates during this meeting are next to none.

This means stocks have at most two to three weeks before the “floor comes out” beneath this rally. Markets don’t like to be disappointed, and the Fed is about to disappoint the markets in a BIG way.

That’s the bad news.

The good news is that as soon as stocks begin to break down again, central banks will move to intervene directly in the markets.

You see, the Fed WILL start easing again – but only once the stock market collapses. The below chart shows the level at which the Fed will finally be forced to take action.

Chart

Those who trade this effectively stand to make literal fortunes.

And as exciting as that is, the opportunity in the currency markets will dwarf even that of the stock markets.

You see, it’s a secret of the investment industry that the currency markets are where the BIG profits lie. Most of the investment legends you’ve heard about (guys like Stanley Druckenmiller, George Soros, and others) made the BULK of their fortunes from the currency markets.

Indeed, even Warren Buffett, who claims to be a “stocks only” investor, made most of his biggest investments based on what was going to happen in the currency markets (a weak U.S. dollar).

Put simply, if you are looking for HUGE gains, currencies are where you need to look.

With that in mind, my proprietary trading system, Alpha Currency Profits is already using the currency markets to lock in massive returns in every other week.

Since its creation, Alpha Currency Profits has shown returns of 52% in two days, 75% in five days, 79% in four days, and even 100% in just four days.

And mind you, those are just the gains we’ve seen since early JUNE!

If you’re interested in seeing these kinds of returns, you can find out more about this unique trading system below… and the best part is, we’re trading currencies without touching the dangerous foreign exchange (FOREX) market!

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Best Regards,

 

Graham Summers
Editor, Money & Crisis

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Graham Summers

Editor Graham Summers has spent the last 15 years building a reputation as one of the most sought after and highly respected investment strategists on the planet. His work has been read and quoted by former Presidential advisors, award-winning institutional analysts, U.S. Senators, and more. He’s one of the few analysts on the planet to...

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