The market has been in and out of positive territory following yesterday’s huge rally, as the bulls and bears position themselves ahead of today’s decision on interest rates from the Federal Reserve. The Fed is expected to cut rates by a 1/2 or 3/4 of a point but Wall Street also taking bets on a smaller or wider cut. The current rate stands at 1.5%.
If we get a 1/2 point then we are right back where Greenspan had us. The big arguement is that this is why we are in a “recession” because money got so cheap to borrow. That is a can of worms that I’d rather not open because all we care about is figuring out which way the market is going to move.
Depending on the rate cut number, the market could rally, have a major sell-off or simply remain flat. I highly doubt the latter will happen because of the recent volatility. In fact, the market has made at least a 400 point swing in 20 out of 21 trading days this month. Many of the moves have been in a much higher range and we have probably averaged something like 700 points swings for the Dow.
Yesterday’s 900 point rally was impressive but we should know real soon if it was a bear market rally or if it is a rally that has legs. The Dow is up 63 points to 9,128 and we are about an hour away from the rate cut news. If we get anything less than a 1/2 point cut, it’s hard to say how the market will take it. Many expect a sell-off but it doesn’t really matter what the rate cuts are. Money is already cheap and the entire banking system is a mess. However, today’s news should move the market by triple digits one way or the other.
Rick Rouse
Rick@OptionsMentoring.com
