A close below 1490 and now it will be short the open everyday? I am having a hard time believing things are that simple.
This looks like big institutional traders trying to punish the Fed for not cutting more. Given the strenght of the bounceback so far + seasonality + fund managers really wanting an end-of-year run-up...I wouldn't read too much into it.
How is this punishing the fed? 10 yr yields are now 3.98%, 30yr at 4.47%. Isn't that the plan to keep the home market afloat and refis/cashouts continuing?
The Fed watches the stock market as well, though they claim they're not worried about those "speculators." As for the Santa Rally being over (other post), you're actually basing that on one day's action? If you're call on that is right, it will be pure luck. The rally up from 1406 on S&P has hardly taken a break. A pullback of some sort (even just 2 or 3%) is almost inevitable. Way too early to make such a call...
I didn't call the santa rally to be over - I merely noticed this market has shifted sentiment quickly above and below the 1490 pivot lately, which might explain the degree of the selling. I'm not excited to get short here, but the 'been here, lost a ton' feeling of going long at these prices is all too familiar. My call was actually to buy bonds, and buy equity calls. http://scriabinop23.blogspot.com/2007/12/is-treasury-bull-done.html
Absolutely right. We were up over 7% in ten trading sessions! We rallied because we were testing a low and the Fed's Don Kohn made a speech that indicated the Fed would cut .50. Well, they didn't cut .50, we were overextended, so the market sold off. However, one of the long term problems here is that the feet-of-clay academics and bureaucrats at the Fed are on the verge of destroying all trust and credibility with the markets. They may be top quality academics and bureaucrats but they are ill suited to the job they have. The markets and the economy are very psychological. They're not just a series of equations and the current Fed does not understand that IMO. We'll probably be down the rest of this week then do some damage repair next week. The 1/4 point and mealy-mouthed statement from the Fed have killed the chance for a significant rally through year end IMO. If any one of the week's remaing data - PPI, CPI and Lehman earnings - are bad, we could get hit pretty hard.
The Fed is not there to save your irresponsible a$$ by pandering to the market and giving them a bunch of rate cuts when the economy is not even in a recession and unemployment at 4.7%. The dollar is weak enough as it is, an acceleration of the printing presses spells disaster down the road. Still the Fed made a mistake. They shouldn't have even cut rates.
The Santa Rally part was responding to the other poster ("bgp"). I agree it's tricky finding where to go long. So far this year, only two things (in hindsight) seem to work really well. (1) Selling just as prices break down from a yearly/all-time high in the indexes (2) Buying right around the 10% correction point. We're right in the middle of those two, and there seem to be nothing but head-fakes and surprises in this area.