Powell signaled potential rate cuts on Friday. The market currently prices in a 60% chance of a 25 basis point hike and a 30% chance of a 50 basis point hike, with no consideration for rates remaining unchanged.

Economic pricing

It’s important to note that much of the economy has already factored in rate hikes. I spoke to a mortgage officer recently and he said that current rates already reflect 2-3 anticipated rate cuts for 2024. The crucial question is whether an official pivot will trigger a market rally or result in a sell-the-news event.

SPY resistance

With SPY failing to break above 562 on Friday, I’ll be watching this level tomorrow. Given recent trading patterns, SPY might gap up in premarket, potentially skipping this resistance. If this occurs, significant volatility may not return to the market until the FOMC meeting on September 18. I’ll also be keeping an eye on the rising wedge since we’ve recently moved back into it.