What's the possibility of an intraday rate cut this week? If the liquidity injections from last week (and possibly Monday) do not work, and the PPI and CPI numbers are relatively tame, there is a strong possiblity Helicopter Ben will drop the Fed funds target rate a quarter or possibly even a half a point. While this may or may not happen, for the sake of argument, let's assume it does happens. I'm specifically wondering if anyone is making plans for the possibility of an intraday rate cut. Obviously trading with a stop is must as it always should be. However, I trade the eminis and I am concerned an intraday rate cut might induce some big hedgies or banks to start placing some market orders for a million contracts that would sweep the book to the daily limit, thus making even a hard stop worthless. One risk management strategy would be to avoid short trades this week. However, shorts this week might be spectacular as the possibility of a serious slides are still high if more chicanery is discovered at Goldman for example. Remember the SEC is now checking the books of the big banks. Anyone else thinking about the possibility of huge intraday gaps this week. What's your game plan. Thanks. jbob
No. Friday's liquidity put a bid under the market. You were supposed to dump your positions yesterday.
Almost no chance. Lowering rates would almost certainly cause a huge drop in the dollar and a huge rise in oil prices. We have a lot of work to do on the clean-up of the sub-prime problem b4 we can look for lower rates. The fed will have to cut - but not until they get all the cards together.
if by Tues., the equity markets continue to crater and there're no bids for at least a majority of the junk crap that the banks need to dump..... then there's a chance.........
At 8 to 1 thus far against a surprize intraday rate cut, it looks like a lot of people would be caught offsides IF THE FED DOES CUT RATES. This gets back to one of my original questions, and why I put this into the "trading" forum. Is anyone changing or altering their trading plan in case the fed eases? I suppose for many the answer would be NO since you don't think that the Fed will cut. However, for the sake of argument, if things got worse this week and you changed your mind about the Fed cutting, what would you do differently. Anyone changing their trading plan? For example, I try to be flat just before the 7am economic number because things can get whippy. I sort of feel the same way about this week. I don't want to get caught short if there is a surprize rate cut. Doesn't anyone remember what happened the last time that happened intraday. Holy crap. Buckle up. Thanks for the responses.
No doubt that a "surprise" cut would find sellers ala' the cut on 1/3/01. The trouble is those sellers won't take control until around 60 ES higher. That being said: Unless the market trades SHARPLY lower i.e. the mid 1300's, the chances of a surprise cut are nil. The FEd had a chance to telegraph concern in their policy statement on Tuesday. There wasn't even a hint.......
Voted "No". They're too dumb to understand what's going on and do the right thing, especially since Bernanke appears to be in a competition with Trichet for terminal idiocy. The last Fed statement already proved that if they hit a post with a car at 3am in the morning, it'll be a meeting of the minds.
I wouldn't flat out dismiss the possibility of a rate cut. The talk among macro heads this weekend has been the possibility of a keynesian 'liquidity trap'. I don't believe in that stuff but I wonder if fed officials do.
A rate cut is like asking a pay cut; For average people taking pay cut after banks rob their home; it likes dumping oil into fire. Make thing worst; not better.