Powell is still trying to wean the market off the Bernanke, Yellen puts, but it is a process not a cold turkey move. The main point to take from his presser: there are crosscurrents (trade, world economics, shutdown) and while they exist the Fed has to step back and reassess. That includes rates as well as the balance sheet, even though he wants to get that balance sheet written down. Cannot do it all at once to financial markets addicted to Fed crack. So, you see what I consider a stair-step approach, now backing off after starting to get the market used to it. Those crosscurrents are going to be here for awhile, however, so the Fed is implicitly a non-issue for the time being.
We are not buying too much. Things can get overheated on these days and there is still the China/US trade meeting that will likely not yield any serious breakthroughs on IP theft and the like. Thus there is the possibility of upset a bit after such a big upside, Fed push rally. That will, however, provide opportunities to enter in an environment where the Fed is off the front burner, again, for now.
More after the close. I note DJ30 is at the 200 day MA, backing off from it. Solid gains in large caps, small and midcaps lagging but not garbage.
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Jon Johnson, Chief Market Strategist
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