Fed interest rate cuts always come with stock downtrends
Fundamental analysis :
1. US stocks are currently priced equivalent to 0% interest rates. The era of cheap money is over, with the 5.5% fed fund rate re-pricing US stocks at a lower base.
2. After 15 years of increasing debt for development, the debt of American companies has now reached maturity. Maintaining a huge amount of debt at high interest rates for a long time is unthinkable. After a year of holding back, companies with large debt will soon be financially exhausted, and a wave of bankruptcy is expected to explode in 2024 (in 2023, the number of bankrupt companies in the US will be the highest since the 2008 financial crisis.
3 . The Fed cutting interest rates has never been a companion to the uptrend in the stock market. At the Fed's last 3 interest rate cuts: 2001, 2007, 2019, the US stock market Dow Jones all entered a downward trend with a decrease of 38% to 55%.
Technical analysis
4. Currently on the daily chart of the Dow Jones stock index, the price has entered the overbought zone with the RSI technical index reaching 80, warning that a sharp decline may take place. At the last 4 overbought times, Dow Jones has decreased in price by at least 9% and at most 16%.
5. On the weekly chart, the Dow Jones stock index currently reaches 36k6, close to the 2021 peak at 37k. It is likely that Dow Jones will create a long-term double peak model and will start a downward trend in the first quarter of 2024
6. If Dow Jones creates peak number 2 around 37k and goes down to break the neckline around 29k, then the destination of Dow Jones in the long term is the price range around 20k-21k
1. US stocks are currently priced equivalent to 0% interest rates. The era of cheap money is over, with the 5.5% fed fund rate re-pricing US stocks at a lower base.
2. After 15 years of increasing debt for development, the debt of American companies has now reached maturity. Maintaining a huge amount of debt at high interest rates for a long time is unthinkable. After a year of holding back, companies with large debt will soon be financially exhausted, and a wave of bankruptcy is expected to explode in 2024 (in 2023, the number of bankrupt companies in the US will be the highest since the 2008 financial crisis.
3 . The Fed cutting interest rates has never been a companion to the uptrend in the stock market. At the Fed's last 3 interest rate cuts: 2001, 2007, 2019, the US stock market Dow Jones all entered a downward trend with a decrease of 38% to 55%.
Technical analysis
4. Currently on the daily chart of the Dow Jones stock index, the price has entered the overbought zone with the RSI technical index reaching 80, warning that a sharp decline may take place. At the last 4 overbought times, Dow Jones has decreased in price by at least 9% and at most 16%.
5. On the weekly chart, the Dow Jones stock index currently reaches 36k6, close to the 2021 peak at 37k. It is likely that Dow Jones will create a long-term double peak model and will start a downward trend in the first quarter of 2024
6. If Dow Jones creates peak number 2 around 37k and goes down to break the neckline around 29k, then the destination of Dow Jones in the long term is the price range around 20k-21k