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Although the market was expecting a 25 basis point cut in the Fed funds rate today, investors were surprised when the FOMC decided to stand pat. However, even though that resulted in a wave of selling, rumors that the Fed might be willing to led AIG the money they need to stay liquid triggered a wave of buying that allowed the major indices to close at the highs of the session.

While market players may be hoping that some sort of solution to the problems at AIG will help the market put in a bottom, we’re not so sure that will be the case. The bailout of FNM and FRE was supposed to be a one-size-fits-all fix, and we suspect that plenty of folks are just waiting for the chance to sell strength just like they did after that event a couple of weeks ago. In general, we think that investors are starting to come to the realization that there is only so much the government can do, and the blow-ups and meltdowns won’t stop just because AIG is saved.

Regardless, of how all of this plays out, our job as individual investors at this point is to try to figure out how we are going to deal with this market. This was one of the most random and rumor-driven days we’ve seen in a long time, and it felt like and trades were simply rolls of the die. The point is that we shouldn’t feel the need to be trading all of the time. Sometimes it is best to acknowledge when we have no edge and simply stand aside.