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Date: 8/21/2001
Opening Comments:
Yesterday was was pretty much what I expected. Some decent volatility with the major indices moving into positive ground by the close.
Today is Fed day. Around 2:15pm ET the Federal Reserve Board will announce their decision on interest rates. A 25 basis point cut is pretty much a given when looking at the Fed Funds Futures. And this should be priced into the market already. There is a chance at a 50 basis point cut. This is what I want with the statement that things are looking better but they are taking an aggressive stance now to ensure that holds up. If the Fed moves to a neutral stance on easing the market may rally well on as that means the Fed sees a turn around. We must listen to what they say in their statement with the rate decision. We will get a knee jerk reaction to the decision, but then may reverse it or add to it once the wording is digested.
I don't see a huge market move unless the Fed makes a very strong move in the wording of their decision or cuts rates more than 25 basis points. Some feel if they leave rates alone we can rally hard. I don't agree, but will go with the flow if that happens.
Yahoo didn't do much yesterday though it held up after an early jump. This will be a good stock to watch once the Fed makes their decision. More on the down side than up. Sure it will move up if the market rallies, but stocks like JNPR, CIEN, LOW, HD, MWD, NETA, PCAR, TQNT will move better. If the market sells and can sustain a move lower for a few days, yahoo will not only move down to around 10 it should so so with very little volatility. And that low volatlity is what we need in a position trade so not to be stopped out.
I would wait for the Fed decision this afternoon before entering any trade that will be held overnight. I also expect some strong market volatlity after the Fed decision as the actual interest rate decision will get a knee jerk reaction and then the policy statement will get another one, once digested.
As a fair disclosure item I need to say I am fighting a bad Summer cold and am taking Dayquil. So if there are some major typo's or other errors you'll know why.
Happy Trading.
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Stocks To Watch:
Stock Symbol Entry Target Long/Short Exit Range Time Frame Stop Loss Range
NAS & /NDU1
Image Courtesy of CyberTrader
A chart of the Nasdaq and Nasdaq futures over the past year is not a pretty one.
It is really almost unbelievable what has happended to the Nasdaq and the many stocks that are in it. I can remember trading ATHM and thinking this stock will do great things. I was trading it in the 20's to 30. It ran up near 100. It is now below 50 cents and may be delisted and even go out of business. In a very short period of time. We have lived through a market event (truly a bubble)that will be looked upon in the history books for a long time to come. Not that knowing that helps any of our 401k plans or other long term investments.
If the market sells today on the Fed news one has to look for support in the low 1800 area. If that cannot hold we could very well be on path to April's lows. And if we do break 1800 and do not bounce back meaningfully by Friday one should be short big time into and past Labor Day.
If we rally today, we need to see it sustain itself into the weekend. The final week of August can almost be thrown out if the market can hold near 1900 or above.
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