Next week, the business channels and other forms of financial media will be littered with all sorts of investment professionals attempting to be economists and Federal Reserve experts. Yet no one expects a change in the fed funds rate at the May 7 FOMC meeting. Still, that changes quickly for the June 18 meeting. In June, according to the CME FedWatch Tool, there is a 61% chance of a 25-basis-point (bps) cut from the current 4.25%-4.5% target rate. The last cut was in December 2024. With the two-year Treasury yield down to 3.67% from 4.4% early in 2025, the Fed finds itself behind the curve (again) by 58 to 83 bps. Going out to the last 2025 FOMC meeting, the market sees the fed funds target 100 bps lower, at 3.25-4.25%. Elsewhere, we believe that the SPDR Gold Shares (GLD) have completed a five-wave, parabolic, blow-off top and could see some decent downside in the months to come. The advance from April 9 until April 21 was steep, reminiscent of a wave-five asymptotic top. The market saw an ugly bearish cloud-cover candlestick reversal the next day on massive volume, common after a parabolic move. It certainly looks like GLD has benefited from the weak U.S. Dollar Index that started in January. It appears the greenback has traced out a five-wave decline and is close to tracing out a false breakdown. In addition, the COT for the dollar is bullish, a signal that has been very reliable in recent years. It's difficult to say how far GLD will drop. We look for a decline at least to the 257-275 region, where there is a cluster of support. (Mark Arbeter, CMT)

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Stocks are mixed at midday. Maybe the calm before the storm. This is a big week for earnings with four of the Mag7 reporting. The economic calendar is jam-packed with key data coming on jobs, inflation, and GDP. The yield on the 10-year Treasury note is 4.23%. Oil is down 1.7% at $62 per barrel. Gold is up 1%.

If the stock market was a boxing match, the bulls were saved by the bell on Wednesday, at least for one day. In this highly unpredictable environment, where just one headline can mean a crash in stock prices and another can mean soaring prices, it's probably best to sit on your hands, not panic, and let things unfold. With all the things we look at, this feels like COVID 2.0. A waterfall decline, turning the masses hysterically bearish, followed (maybe) by a massive rally just after many decided to throw in the towel on equities. The S&P 500 (SPX) soared 9.5% on Wednesday, the Nasdaq and Nasdaq 100 (QQQ) both skyrocketed 12%, and the S&P 400 and S&P 600 both spiked 9%. It was the largest one-day jump for the SPX since October 2008, and just beat out the 9.4% pop during COVID-19. It was the largest Nasdaq gain since December 2000, and since October 2008 for the QQQ. NYSE advancers crushed decliners by 2,740 issues, the best such result since 2010 and one day late in 2008. NYSE advances/issues and NYSE up volume/total volume was very strong at 93%. That type of strength often marks the start of a new uptrend. While one day does not make a trend, and bear markets are notorious for vicious short-term rallies (see some of the dates above), maybe it will be different this time. Sentiment has been horrible, most stocks were wiped out and extremely oversold, a recession had become a foregone conclusion, and there were huge worries about the upcoming earnings results (with the potential for companies to pull guidance). There is little chart resistance on the SPX until 5,500. That is also a 50% retracement of the correction. (Mark Arbeter, CMT)