GS, FED, GE….the market got more than a ugly gaudy sweater for XMAS this year from these 3 behemoths in their own right!. Most importantly, the FED did pretty well what we pleaded for in the middle of November…”What is going to ‘zero’ and what may save the market is a zero interest rate policy for as long as it needs to be….The FED has to make a statement to go to zero for as long as it takes”.
It took the market more than a few minutes to digest what was really said as it acted like a deer in the headlights. Even though, we said it was reasonable to go to zero the night before, it was still a pleasant shock of sorts as the FED finally got somewhat ahead of the curve. At the end of the day, it seemed like XMAS for many as the market applauded in action and words. Here's the of the decision and statement...
1) will target a RANGE (not an explicit target) for the fed funds rate of 0-0.25% (expectations were for a cut to 0.5%); 2) comments on the economy signal a further weakening; 3) inflation no longer a concern;4) they say that rates will probably. stay at "exceptionally low levels of the federal funds rate for some time"; 5) the Fed reits that they are purchasing MBS and agency debt and will increase these purchases as conditions warrant; 6) Fed reits they are looking at buying longer-term Treasury securities; 7) Fed reits the TALF will kick off early in '09 (which should help consumer financing markets); 8) was a unanimous decision.
Yes, Santa has a helicopter, not a sleigh!. As far as GS & GE, let`s just say they were stocking stuffers
Both were received positively, GS just by surviving and GE by reaffirming.
An integral part of our Journals is to prepare all of us for the next trading session. By releasing the last Journal the night before, we set out the importance of the day which revolved around the SPX levels and news items. You know a move will happen in either direction as these items get their release. We followed up in Alerts and Forum as the day progressed as to what we were eyeing as crtical levels, stocks (financials insurers-major indices ETF`s) to go after if a level broken. ..."Now that GS seems to have survived, looking at 885+ break to add a few ETF relating to major indices and some financials like JPM`…Depends if the financials go and we rally, insurers will piggy back , HIG probably has the shorts all over it again, so move could be nice...we wouldnt play it alone as of now.., 16.50 is a wall to watch ..KIE is the Insurer ETF …..FED has gone all out on this it seems, mkt should like,,,901 50ma SPX next important level. 2:31pm.
Simply, by being prepared to watch certain technical levels and what sec'/ stocks would benefit most or not, we all should have had a nice day. SPX financial up 11% inc. a nice move by JPM, 885 level melt up..etc.
By trading day’s end, we broke through a key technical level the S&P cash of 901 and finished at 913, a close above the 50 ma for the first time since the beginning of September. This did and should bring out many a traders-investor who require such levels to wash the market with money. It`s just a safer trade for many if we stand above the 50ma as some nervousness dissipates here. Let`s just hold it now, a small pullback in the morning and than a push higher would be the positive action to bring more in. There was real buying in the move to go with short covering, most importantly it seems forced selling is pretty well gone at end of day. But, we`re not out of the woods in the short term as in this week as we have some unfinished business. Quick rundown of major catalysts being watched in this last full trading week of the year: 1) autos resolution in Washington; 2) OPEC meeting 12/17 w/ a cut of at least 2MM BPD expected); 3) MS earnings on Wed; 4) earnings Thurs, ORCL, RIMM; 6) SPX indexes-Nasdaq 100 rebalancing, quad witch to close the week.
Going forward, the Broker-Financials-Insurers are definitely beneficiaries of the the FED decision. But, we also have because of the larger than expected cut & reiteration of buying agencies/MBC/etc equalling a dollar bearish. This brings the whole commodity picture into the framework of what we are going to be trading further. The timing could not have been better as we've been on this dog's tale lately anyway. In our view, the action even though mentioned late today as heavy commodity ruled, we did not see this materialize to the degree we expected. For one thing, most Ag's-Chem stocks (POT MOS) were already moving before the decision on the back of a Merrill Lynch upgrade. CMP , continued it's 2 day move after the announcement. What surprised many was that Oil and its'/ sector was no flaring up. We think this totally b/c of the sell the news headline out earlier that Saudi Arabia is calling for a 2mbd before the OPEC meeting. Crude should move with a significantly weaker dollar sooner than later.