Tuesday, December 16, 2008

Fed Pulls Out The Really Big Guns

Investors finally got an excuse to do some buying today after the Fed delivered a larger than expected interest rate cut. Never mind the longer-term implications of such an unprecedented move – the Fed now has a target range for the Fed funds rate of between 0.0 and 0.25%... just in case you hadn’t heard. Investors are looking to put some lipstick on the pig that the stock market has been this past year and the bears are more than happy to let them have some room in a seasonally positive trading environment.

The big question, of course, is if we can see some follow-through. The market has had such an annoying tendency to reverse moves on a day-to-day basis and to see huge intraday swings that it’s hard to put a whole lot of trust in anything it does right now. That said, the indices have made more short-term technical progress by moving above their respective 50 day moving averages and by putting in another short-term higher high. Meanwhile, there are, for the first time in quite a while, some better individual chart set-ups, and that is encouraging.

We’ll have to see how things play out, but at least in the near-term, things look good for the bulls. They have the ball, and now they just need to run with it. The recent volatility has been very annoying, but it’s not likely that there are many folks out there who are positioned for any sustained strength, and if we can start generating some upside momentum, then that could start sucking in some money off the sidelines.

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