A Non Event

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Despite all of the hoopla and anticipation of the Wednesday’s interest rate cut, the markets ended on a down note. In a way, it may have been a classic “buy the rumor sell the fact” type of outcome. Personally, I think it’s slowly sinking in that these unprecedented rate cuts of the past 8 days actually represent bad news about the health of the global and domestic financial markets.

The major averages spiked up after the announcement of a 50bp lowering of rates with the Dow gaining some 200 points before drifting into negative territory on the close. Apparently, the downside move was spurred by a news report that bond insurer FGIC was downgraded by Fitch from AAA to AA. The markets hit a glass ceiling and it was downhill from there.

So far, this week’s events have left our trading plans unchanged. The domestic TTI remains below its long-term trend line by -0.37% while the international TTI has retreated to -7.39%. Both are therefore in bear market territory, and I will look for more downside confirmation before initiating any short positions.

Right now, we’re safely on the sidelines. Friday’s employment report has the potential to throw the markets into a tizzy fit. I will watch the action but will sit on my hands until some major trend emerges.

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