What a week it’s been! Volatility came back into the picture after the Fed cut rates and Fed Chair Powell exclaimed that there is a concern about inflation over at the Eccles Building. But let’s be real here: When is the Fed ever right about anything?
I wish I could confidently say that the central bank is playing “4-D chess,” and that they’re crafting the illusion that inflation is a probability so that they can “surprise” the markets with more rate cuts next year.
But here’s the thing: I don’t think the Fed is all-so-powerful. I think they listen to the market a lot more than people give them credit for.
I want you to have a look at this energy setup that I think will save the Fed going into 2025, and allow them to cut rates more than currently expected.
The Bigger the Top, the Bigger the Drop
I’ve been talking about the potential breakdown in the energy space for a couple months now, and as you can see on the chart below, it’s been a choppy snooze-fest over the past few weeks especially.
Even if you’re a short-term trader, it’s important to always know the state of the longer-term trends. Crude oil has been making lower lows and lower highs since its peak in 2022, and I’m closely watching this inverted saucer setup, which is pointing to at least a $15 to $20 drop.
In fact, I’ve been attributing this imminent drop in crude oil to the Trinity Trade. It’s taken a little longer than expected, but I’m finally excited to share that we’ll have a big update on this emerging market trend next week.
What we were missing on the energy front was a narrative in support of inflation, and that’s what we finally got with Powell’s presser last week.
If crude oil suffers a big drop as I expect, it’s going to give the Fed cover to lower rates notably in 2025. To be clear – we’re not going back to the zero interest-rate policy (ZIRP), and we’re not going back to quantitative easing (QE), but we’ll probably get more than just one or two more cuts as the market is now expecting after the latest rate decision.
As always, I will keep you posted,
Gianni Di Poce
THEOTrade
