The Fed Flinches

NEW -> Contingent Buyer Assistance Program
Expect a strong bounce in the market (200 points have already been shaved off the losses in the Dow futures) today.





It may last a day.





It may last a few days.





It may even last a couple of weeks.





But it is setting up the shorting opportunity of a life time.
 
The fed had no choice. The world stock markets have just weighed in that the credit crunch is a profound danger to the world economy (a little late to the party but better late than never and all that). A little inflation is a bad thing but nothing compared to a depression.
 
<p>WINEX - The bounce may not even make it to the opening bell.</p>

<p>FairEconomist - The fed and the government can prevent neither.</p>
 
Awgee, I'm probably sure that you will agree that the markets can humble you. That having been said, here is something more specific to offer me a chance for some humility.





If you look at market action the past several days, the markets have been generally positive in the preopen to early going, then sold off throughout the day. Everyone has been waiting for an oversold bounce, and that has prevented any bottom from forming.





We need panic before we can get any kind of a meaningful rally, and it looks like panic is here.





It today isn't an up day, then tomorrow is.





But any rally won't hold in the long term. It's now official, the Fed has lost all credibility. Greenspan really really sucked. But even he would have timed an inter-meeting cut to the end of last week before options expiration. The speech last Thursday where Bernanke said "good things are coming" didn't enhance his credibility, and it's shot even more now. It is now official, he is Wall Street's bitch.





Morbid curiosity has me looking forward to the meeting next week. Will there be another cut? If so, what does he see then that he didn't see now?





Hopefully his replacement will be competent.
 
<p><em>"We need panic before we can get any kind of a meaningful rally, and it looks like panic is here."</em></p>

<p>Ya think 450 points, 3 1/2%, is panic?</p>
 
I dunno. It looks to me like the bulls are still hanging on. I hear panic in their voices on MSNBC, but they are still talking about buying good values here. And I think the close today will be much more important than the open.
 
BubbleVision will always talk about things like that.





But I agree that the close is more important than the open. And I won't be surprised if today is an up day.





That having been said, if you look at the October 1987 crash, and the July 2002 lows, after the rally after the panic, the lows were retested. They will be after the coming rally as well.
 
(although a little different version back then) the equivalent of today's VIX got much closer to 50 during the previous major market bottom.
 
the trading bottom of '98 after LTCM, and '01 after 911. If I remebered correctly, the old VIX registered highs of 70+, perhaps equivalent of today's VIX's 50. I am guessing since I don't have the tools nor models.
 
<em>"The speech last Thursday where Bernanke said "good things are coming" didn't enhance his credibility, and it's shot even more now. It is now official, he is Wall Street's bitch.<strong>"</strong></em><strong>





</strong>Well put Winex.
 
<p>On a personal note, I love the 0.75 cut cuz it reduces my student loan rates. Big picture, just a step down the seventh circle of hell.</p>

<p>I keep hear on the MSM about how awful a recession is. Recessions are not bad. . . they are normal. The reason why we are in this mess is because we refuse to go into recession after the 1997 Asian crisis and the dot com bubble. Now we have three recessions packed into one. Stagflation? Anyone? Anyone? Maybe the Laffer Curve.</p>
 
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