Top Line: The stock market struggled higher on Tuesday with the Dow managing almost a 100 point move. The NASDAQ indexes were up but not as strong as the Dow. The market did not look like a pillar of strength. This may be due in part to the notion that the Fed may not come to the party on Wednesday with very good news.
The futures did think there would be pretty good chance for a half point cut but the stock market may not have been so sure. We continue to think there is some room for the market to move up out of this oversold condition but the Fed news tomorrow may unsettle the market, if the lower or not.
If the market gets their precious 50 bps drop, it is possible they will look around and say one or both of the following: The Fed is scared and/or The Fed has little room to go down much from here. If the Fed doesn't lower, the market will probably cry so Ben can't let that happen. We see another 50 bps drop, which is almost hard to believe after last week's quick 75 bps drop. 125 bps in about a week in two moves...Unbelievable. Again, the Treasury market gives the Fed latitude to lower more than a point so we are confident in another 50 bps.
FSI: 82.27 (new low for the year)