Fed takes the 911 call.

The tensions building up…traders/investors losing patience….heat building up throughout the trading sessions ….this was the theme in the market for the last few days. More and more killing news was making it to the wires. Some even screamed ON AIR asking the FED to cut rates. You know who 

But, the fed kept it’s cool. As everybody knows Fed doesn’t cut rates and increase inflation whenever you have an issue in the market. Is FED responsible for that?

The housing and the credit crunch were bound to make their way into the market, thanks to easy loans for the last three years. Fed has tried more than thrice last week to cool down the market by injecting cash into the system. But, that neither seemed to calm the bears, nor did it boost the sentiment of the bulls. Yesterday after a lot of panic selling in the market and a late huge up tick, THE FED rightly now cut the discount rates instead of cutting the fund rates. This should act as a coolant on fire and take the market to a sober situation.

But, people ask have we bottomed yet? Do we still need a fed rate cut? Is this short term issue going to throw us into a recession? Don’t we still need a rate cut? Should investors take profits on any rally and sit out till the FED cuts the fund rates? Time only can answer this !

But as of n0w I can tell you guys this ….

The discount rate fed cut, covers only loans that the Fed makes directly to banks. But the funds rate covers all loans that banks make to each other on a short-term basis. It is much more critical in determining interest rates in the economy.

It depends until when, but the market in my view is still in a bearish pattern medium term. Today, I’m sure most would say we have bottomed. But as recent as yesterday, some on the street were asking to take losses and get on the boat when it bottoms. I want you all to look into the medium term and long term unless you are a day trader.

The major issue here is …..What fed today did is no different
than what it has been doing for the last 2 weeks, but in a bigger
potential. Recollect what fed injections have done for the last
two weeks, one positive day and then a stretch of bear days. It’ll be
the same now…but may be we’ll be positive for more than a few
sessions…like may be a couple of weeks which will be kinda boosted
with the short covering.

Short term we are positive. But what about medium and long terms? What we are seeing today is not major buying, it is major short covering. I think we still have some more to go down. Hold on.

Hope that helps.

Please leave your comments.

Your Adarsh.