Tough decision ahead...

Mr. Bernanke and company won't be making an easy decision when they announce their policy tomorrow.    It is no secret that market participants have wanted a sizable rate cut.  Many times what the market wants, it gets from the FED.   What we don't know at this point is that if the expected rate cut comes, no matter the size, how is the market going to react?   What's also important, if not most important is the Fed's view on recent market turmoil and economic outlook.    Every word of the policy statement will be digested and analysed and we should know how people feel by 3:30 p.m.   

Instead of betting on the outcome of the reaction, we'd prefer not to take the risk and wait near the close to do some position shuffling.    As far as we are concerned, there's likely going to be three possible outcomes.    An extreme selloff, a powerful surge, or a flat line who cares kind of action leading into the crucial employment report later in the week.    Given the last couple of fed meetings and the skittish nature of this market right now, we think the first two possibilities are more likely.    We feel that a good approach might be to wait till late in the day and take the opposite action of an extreme reaction, good or bad.

After 2 boring days already on the NASD this week, tonight's YHOO report is not giving people any comfort when it comes to internet/technology sector.  However, YHOO has had a long history of disappointing reports because it's simply losing the battle to its competitors.  It`s a well known fact.   If we do get a surprise extreme reaction on the other two because of this report,  GOOG and BIDU tomorrow, we'd be keen to look for a long trade near the last week's low.     Keep in mind,  GOOG is also set to report Thursday AH, so any trade we do tomorrow on those two would be closed before the Google report.

Chemical/Agri. we still like this group but we feel the recent action may require some consolidation/pullback move in order to stablize the group.   Again, this is the group we'd be trading heavily if we get an extreme reaction from the Fed policy tomorrow.    One thing is for sure, this group has got the goodies (earning wise) and it's safer to add on pullback compare to many other groups.

Shippers, it does seem lately that this group has perked up from the lows and looks to be stabilizing.   We'd like to see if this group can weather anymore severe market downturn before getting ourselves involved on the long side. 

Bottom line, last week's low is still serving as a short term bottom and we'd be looking to fade the extreme moves until a clearer trading direction is established.    Next couple of days are likely going to be very volatile,  so we are looking to take advantage of some of the moves to flip in and out some of the fast movers.