FOMC Acts, Markets Fail to Follow Through
Posted on January 31, 2008
Filed Under Market Speculator |
6:30amEST Federal Reserve Cuts rates to help the market but markets fail to impress.
Helicopter Ben and company voted to lower rates, taking the target rate down to 3%. This is after the surprise 75bps cut on Friday January 25th. Big Ben is now at the mercy of market pundits like Larry Kudlow and Jim Cramer who have been begging for a rate cut. The market’s reaction to all of this was very, very bearish. If the rate cut had been what the market had needed, we would have had seen the market mark a follow-through day. However, the market slapped a big Distribution Day on the table!
What ever should an investor/trader do here? It is quite simple, if you are not managing a 100mm dollar portfolio you should be in cash or at least short some of the old leaders. GOOG comes to mind, it may not offer an opportunity to get short near its 50dma. What is also interesting coupled with all the former leaders cracking is the lack of strength in the Dow Jones Utility Index. Normally, in a bear market/recession type market Utilities tend to be the leader along with medical stocks. So far, only the medical stocks seem to be holding here.
My game plan is to continue to sit tight, waiting for the action to set us up for some nice new longs. The real question is how long may that take? A notable Chinese philosopher said: “Those who predict do not have knowledge, and those who have knowledge do not predict.” At some level, I do have knowledge and I a can not tell you when our chance to get long again will happen. One thing is for sure, we need to see the overall indexes start showing some accumulation not distribution.
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