Wednesday, March 18, 2009

Whipsaw Movements Today On Fed Actions

While it had been rumored that the Fed would venture into buying some Treasury debt, the market was apparently surprised to see it actually announce such a move today. As so often happens on Fed announcements, we had some big whipsaws in the indices and a lot of second-guessing of the strategy.

It didn't take long at all for market commentators to start to wonder about the repercussions of yet another big dose of liquidity. The collapse of the dollar and a big reversal in gold following the Fed news indicate there are substantial fears that inflation will ramp up. On the other hand, consumer and mortgage loan rates should be coming down and it's obvious that there is going to be a lot of additional cash sloshing around out there, which can boost confidence and perk up the economy.

While there is plenty of celebration about the big bounce this market has seen over the past week, it has not been easy to trade. We went straight down and then straight up without much backing and filling in either direction.

This has been a good jump for those who stuck with longs they rode down or for those who were willing to chase a bounce. If you have been underperforming this past week, don't worry about it. Sharp bear market spikes will always make prudent traders feel a bit left out. The great thing about the market is that if you stay with it, the opportunities will always come. Just keep plugging away.

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