Simply...the FOMC, by cutting its target Fed rate and Discount rate by another .50pts said put up or shut up to the market. They've given everything including the most recent .75 cut for all the dry powder, cash that has been sitting on the sideline waiting for a reason to get back into this dismal market. It also happens to be the FED can't put up much more. It has pretty well exhausted it's ability to do more as they have little left to cut. Seems the only thing cuts do these days is let the market use it as a reason to sell the news. Considering the markets got what they wanted it sure put in a paltry effort to show it was thankful. Yes...the timing of the Fitch credit rating downgrades rumors of the insurers was quite suspicious, but the least the market couldn't have shown was not to sell so fast and show some appreciation and say we accept your apology for being so behind the curve. That was no way to show confidence or give confidence to all of us looking forward as the markets weakness to sell on all the old concerns is still prevalent and overshadows anything the FOMC will do. The expectation of yesterdays decision was like a New Years countdown only to have one guest (the insurers) come in and ruin the party. The only cork for the short term that popped was our confidence. It's crazy to think one can spoil a party that should last into the morning, or next trading day as is the case here....but that is exactly what happened. This FOMC decision lead in was worse than all the pre Super Bowl hype. Now, we didn't expect a rally out of the .50 cut as supposedly it was priced in, but to tempt and tease and than to close so weak was not priced in either. It just leaves a sour taste in many and gave the shorts the ammunition they wanted and were waiting for. What this means and was probably a big reason for the letdown was technically the DOW hit a point of resistance by hitting the 12600+ level. Simply, the shorts were waiting with gloves on to put in a punch and drive the market back down, of course the bulls use it too as an area to sell and just added to the potential burn. We've said the recent rally is probably a way for the shorts to reload and you can't blame them when even the bulls think we need to test the recent lows before we can move forward. Talk about showing your hand!.
What now?. Well...things are not any clearer, sure the cuts will help down the line but it does nothing for the short term thinking we need to have at this time. There isn't much to add today as we need to see more in the days ahead. This starts with what GOOG produces tonight, unfortunately after seeing all the reports out of internet / tech we can't be all too thrilled of the possibilities we may see and get. We also have the employment numbers coming up. Basically, you can't expect an anticipated cut to do magic by itself, but if you stick it in a blender with a positive report from GOOG, a positive employment report you might be able to mix and blend it together to get something going in the near future...but, that's a lot to ask of this market and economy isn't it?.
A good thing is the next meeting is 6 weeks away for the FOMC and the addicts, which probably most have us become to cut decisions will have to turn our attention to other things and not rely on this so much. Trading individual stocks these days to long side, even to a day long is almost impossible as any gains are short lived....forget about a lunch outing, hell forget a pit stop in the can as by the time you get back your green stock is in the red. Something that might take a few hours to built is evaporated in seconds.
If you believe we are going to test the recent lows very soon because of yesterdays action, you should start shorting the market and the high beta stocks on the heels of the reversal.