Fed Statements Drive New Rally Momentum In The Stock Markets

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Published : August 31st, 2021
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Category : Market Analysis

Last week, the US Federal Reserve reiterated statements in support of continued easy money policies and support for a recovering US economy.  Additionally, Jerome Powell made a statement suggesting tightening too early could be much more damaging than waiting until sufficient headwinds are behind us.  I interpret this as stating the current inflationary concerns are less important than the current global market expectations.  We can likely weather moderate inflationary concerns if the economy continues to strengthen – whereas tightening right now may not reduce inflationary concerns and may prompt a broad market slowdown within the US and globally.

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In short, traders and investors perceived these comments as “Here we go – off to the races again” and the US markets rallied sharply on Friday and in early trading on Monday, August 30, 2021.

NASDAQ/Technology Leading The Rally Charge

This Daily QLD, ProShares Ultra QQQ ETF, chart highlights the extended rally phase of the NASDAQ/QQQ.  With the current Fed statements, we expect $80 to be broken as this new rally phase attempts to target $82 to $84 – another 5% higher (or more).

IWM Breaks Above Dual-Pennant/Flag Formations.

This IWM Daily, Ishares Russell 2000 ETF, and the chart clearly illustrate a very strong Dual-Pennant/Flag breakout that has taken place with Friday’s rally attempt.  The move above $222.50 is very clearly an attempt to break above the Dual-Pennant/Flag channels and to break into a new Bullish price trend.

Once resistance near $227.50 is broken, the Russell 2000 ETF, IWM, should attempt a bigger rally attempt targeting $233 to $235.

We need to see this momentum carry forward through the end of September as the end of Q3:2021 should continue to trend higher with the US Federal Reserve’s recent statements.  Additionally, traders should be positioning capital ahead of the end of Q3:2021 expecting another round of strong earnings and profits in October/November – pushing the Christmas Rally into high gear.

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Have a great day!

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Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and author of the book: 7 Steps to Win With Logic Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better. His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility. He has also been on the cover of AmalgaTrader Magazine, and featured in Futures Magazine, Gold-Eagle, Safe Haven,The Street, Kitco, Financial Sense, Dick Davis Investment Digest and dozens of other financial websites.
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