A look at the daily charts shows the Fed's rate cut worked. Although the markets opened lower ona bug gap down, all the averages spent the rest of the day rallying to fill the gap, slowly working their way back to unchanged (except in the case of the QQQQs).
Let's take a look at the daily charts. These show the possibility that what we had today was a selling climax -- a day of heavy selling at the end of longish downturn. Only time will tell if that analysis is correct.
2 comments:
So Bonddad, WHO or WHAT filled the gap, and with what money? Someone has to be making deals at prices to fill, right? While I'm not so conspiracy-minded as to believe in the (mythical?) plunge protection team, is there a rational explanation?
A look at the daily charts shows the Fed's rate cut worked.
Get back to me in 6 months when the effects of the rate cut are actually influencing the economy. What we are seeing is the simple mentality of the market that says to buy on a rate cut and sell on a rate drop. Because the market works on group psychology, this makes perfect sense. The dramatic surge upwards reflects the emergency and substantial nature of the cut, but at the end of the day, doesn't that ultimately speak to the problems of the economy that will inevitably drag down markets in the near term?
This, perhaps, takes the edge off the fall in the short term, but we'll see what this really does in a few months. My sense is that it won't fix the fundamental problem which is simply that the risks of lending are an unknown. Changing rates won't effect that in the slightest. Also, given inflationary pressures, it's very likely that this rate cut will just lead to stagflation.
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