Jamie Dimon has long been sounding the economic alarm. After the latest Fed rate cut, can you still bet on JPMorgan stock?

Tuesday wasn’t just the day before the Federal Reserve announced its latest rate cut. It was also the day when the leader of American banking stocks fell like a rock.

JPMorgan (JPM) fell 4.66% on the day, after the CEO of its Consumer & Community Banking unit surprised traders by explaining that its spending was likely to increase next year. The culprits: inflation and competition. The result? Lots of market capitalization lost.

One has to wonder if the concerns about the broader economy and market conditions expressed by CEO Jamie Dimon are starting to take hold.

JPM still trades at a reasonable valuation, at less than 16 times current and forward earnings. And it has almost served as a backup government entity in times of crisis, such as in 2008 and again during the more recent regional bank crisis a few years ago. But is his own house in order?

Wall Street analysts tend to think so. “Strong Buy” ratings dominate, and have done so for some time. However, personally, I take these notes with a grain of salt. They tend to be cheerleaders and trendsetters, and their effectiveness is equivalent to that of a bull market. We’ll put this to the test in about a month, when JPM again acts as a sort of leader for earnings season.

Daily is a lot like many other large-cap stocks that I follow. That is to say limited to a certain distance. Or, more frankly, very boring and doesn’t allow for confident decision-making right now. But with the Fed’s rate cut announced Wednesday and days of reaction likely to come, we may soon have an idea.

After all, what’s at stake is the next major bend in the yield curve. In other words, even though we know that rates are more likely to fall over the medium term than to rise, the longer-term part of the bond market still has a lot to gain.

There is a tug of war between the arguments for higher rates (US debt is too high and unaddressed, plus persistent inflation) and lower rates (recession concerns and flight to quality). JPM, as a systemically important bank, will likely benefit from higher long-term rates. Because it can lend at higher rates while the Fed’s short-term borrowing costs fall.

On the weekly chart we see what to me is a much more defined reward/risk tradeoff. For what? Because the Percentage Price Oscillator (PPO) at the bottom of the chart has reversed. And it looks like there’s a leak down there. This leads me to believe that the odds are tilted toward lower prices in the coming months, regardless of the near-term reaction after the Fed.

Also note that the stock’s nearly 5% decline on Tuesday is indiscernible in the weekly chart. This is a good thing in my opinion. This tells me that such a one-day move is just another brick in the wall of worry for JPM stock. This is why caution is required.

However, every stock image has two sides. And so, to present the case for the bullish chart, check out the Summer 2024 PPO in this same weekly view. It certainly looks a lot like the current model. What happened to JPM stock during this time? A rally of more than 10% followed.

Conclusion: This stock is one to watch, not only for its price action, but also as a barometer of the economy as a whole.

Rob Isbitts, founder of Sungarden Investment Publishing, is a semi-retired investment executive, whose current research can be found here at Barchart and on its ETF Yourself subscription service. on the sub-stack. To copy-trade Rob’s wallets, visit new Pi Trade app.

As of the date of publication, Rob Isbitts had (directly or indirectly) no position in any of the securities mentioned in this article. All information and data contained in this article are for informational purposes only. This article was originally published on Barchart.com