Federal Reserve Board Chairman Ben S. Bernanke said more interest-rate cuts ``may well be necessary'' after 1 percentage point of reductions since September to buttress economic growth.
And thus we have an important new dynamic in the market -- that of aggressive rate cuts. In other words, it appears the Bernanke put is alive and well.
The markets first popped on the news from the Fed right after 11 AM. And then we had more speculation/news:
U.S. stocks rose for a second day after Federal Reserve Chairman Ben S. Bernanke signaled he may cut interest rates further and investors speculated Countrywide Financial Corp. will be bought.
The markets were clearly in an uptrend for most of the session. Yesterday I wrote that there wasn't a clear reversal pattern in the market, save for the sharp V bottom. But there was no way to tell if this was in fact a bottom until we had further action. Well, today we had that. When looking at the chart for the entire week, notice the SPYs are pretty much back to Monday's opening level.
The same is true of the QQQQs
And the IWMs
But look what happened in the Treasury Market
Bond traders sold the long end of the curve big time out of inflation concerns.
It sure looks like the markets are changing direction right now. Although I will add this important caveat: The markets will make an ass out of you at any time. And they have a lot more tools at their disposal to do that.
