Now What ?
Yesterdays market action was a much needed bounce off an extremely oversold panic condition. A coordinated action by a number of country’s central banks including our Fed no doubt added some buzz.
As our longtime readers know, we have not agreed with most of the interest rate cuts that Bernanke has made over the past year. That belief was based on a simple premise that rate cuts should be held off until there was a reason, ie. save your bullets. Until recently the problem has been liquidity and now we are sitting at 1.5 percent and there isn’t much room to lower rates when the time has come that rate cuts would be beneficial. So today’s expected rate cut will not have much effect.
As to the rally that is unfolding, it is impressive and should have some legs, The level where the market stopped yesterday, 940 on the S&P, was support before the recent 840 retest. It is important today as clear trading above this level will set up a test of 1000. This 1000 level is a real barrier and at the moment we are inclined to go to 100 percent cash in both Portfolios at that level if it is reached by Friday. 1060 and 1132 hang out there as further rally levels but for the moment we need more information before staying for them.
8:08 AM CDT