One thing we’ve learned this year: if Jay Powell thinks the bulls are out of control, he’ll talk them down immediately. We’ve been spanked again and again.

And yet this week, when Wall Street read his comments as slightly inclined to relax on rates if inflation keeps receding, he didn’t bother to correct us. He let the bulls run.

While there’s always the chance that he’s waiting for the next Fed meeting to punish us in a few weeks, the charts tell me that his posture really has shifted. What he’s telling us now is that stocks have suffered enough.

If the bulls can earn any upside, we’re welcome to keep it. All we need is a good reason to buy in now . . . and entice $5 trillion in cash off the sidelines and into the party.

Start With The Charts

Several months ago, I realized that Powell had almost uncanny timing. Whenever he opened his mouth to talk the market down, the Dow industrials were testing long-term resistance.

Back in June, the Fed chair’s pain point came right after the Dow started flirting with crossing above the 50-day trend. Two months later, when the blue-chip index cracked the 200-day ceiling, he spoke up again.

Both times, the tough tone reminded us that the Fed is ultimately the boss. You don’t pick a fight with the central bank.

Last month, however, something interesting happened: the Dow broke above the 200-day line and kept rallying another 6% so far. At this stage, it doesn’t take much of a push to end the bear market and get stocks back on a record-breaking course.

Powell has had five weeks to speak up. He hasn’t done it yet. And if he’s switched focus to the S&P 500, I’ve got bad news for the bears: he’s let that index crack the 200-day line as well.

Again, he could be preparing another trap to destroy our natural ebullience. But I think he would have sprung it this week if that’s what he wants.

From here, the S&P 500 can easily run another 6-7% before getting into any technical trouble. That’s a pretty good Santa Rally . . . and it clears up a lot of the wreckage the bears left behind.

The NASDAQ remains the real pain point, as overloaded as it is with wounded giants like Alphabet (GOOG), Amazon (AMZN), Tesla (TSLA) and Meta (META). Those stocks have trouble of their own, and until something better emerges within the index to replace their leadership, natural market gravity points down.

The Real Economy

There’s a moral here. Jay Powell doesn’t really care about Silicon Valley or whatever parallel developments are going on in Austin or Las Vegas or the Pacific Northwest.

He cares about the real economy, which keeps most Americans working and which feeds us, clothes us and provides other necessities. That’s the world of the Dow and to a lesser extent the S&P 500.

It’s manufacturing. Banks. Walmart (WMT). Tractors. Scotch tape. Exxon (XOM). Big Pharma. Cross over to the Dow transports and it’s airlines, freight, trucking.

The Dow transports are only down 11% YTD. They’re getting back to work. Powell isn’t getting in their way. And I think that’s where investors need to be.

You don’t fight the Fed. The Fed isn’t fighting this end of the economy. The pandemic distortions already put these companies on the defensive while Big Tech stole all the thunder.

Now they’re roaring back. Let’s join them in the new year.