Mosaic Chart Alerts

Stocks plunge on a shifting rate outlook.

In this post, I’ll focus on setups that I’m monitoring for both long and short positions. With a chart and short write-up, this is a quick way to scan and plan potential trades.

These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup.

You can sign up for a 7-day free trial here and unlock the trade ideas in this report.

---

Stock Market Update

The Federal Reserve cut interest rates by another 0.25% in their final meeting of 2024. While that move was widely expected, investors are digesting the implications of fewer rate cuts coming in 2025. The Fed’s summary of economic projections (SEP) shows the median forecast now expecting just two additional quarter-point rate reductions for all of 2025 (table below). That’s down from three rate cuts in the prior SEP. New language in the Fed’s meeting statement around the “extent and timing” also hints at a slower pace of cuts. That follows interest rate reductions for three consecutive meetings.

Chart from Nick Timiraos on X

Reining back expectations for additional rate cuts should come as no surprise. Recent data around key sectors like the labor market and retail sales shows the economy is humming along just fine. But at the same time, more signs are emerging that the disinflation trend since mid-2022 is stalling out. Many measures of core inflation are accelerating that I shared in this week’s Market Mosaic, while Powell stated in his post-meeting conference that the Fed’s inflation projection has “kind of fallen apart.”

Stocks plunged across the board on the news, although the major indexes might be “catching down” to the average stock. The S&P 500’s streak of more underlying index constituents declining than advancing now stands at 13 days. That points to the deterioration in the average stock seen over the past couple weeks. The percent of stocks trading above their 20-day moving average across the major exchanges now stands at just 15%. That’s the lowest level since August as you can see in the chart below.

If there’s any upside to the pullback in breadth, there are now several breadth metrics entering extremely oversold territory. Stocks don’t have to rebound just because breadth is oversold, but it’s a condition worth monitoring especially as we start a favorable seasonal stretch for the market. The S&P 500 has historically seen a strong second half of December, which also corresponds with the Santa Claus rally period into the New Year. Several chart setups we’re following could also benefit from a smaller pullback before breaking out, particularly in the crypto space.

Keep reading below to see:

• Open ETF positions.

• Open stock positions.

• Chart analysis for new trade ideas.

---