Why does this recent additional cut mark the bottom for the stock market...?
Excellent question, Cents. In my opinion, you have hit on the crux of the bull/bear argument du jour.
IMO, markets are driven by both economics and psychology, in a modern day version of the old "science or religion" arguments. Right now, the psychology is that good ol' Uncle Greenie is going to save us from the mean and evil forces that plague the rest of the world. That is, he is going to inflate us through the worldwide deflation. Carried to an extreme, this could theoretically lead to a negative 'cost of money,' and a situation where it is cheaper to be in debt than in the black.
But, if the realization sets in that the deflation will indeed strike here, and that further cuts by the Fed will have little impact, the same psychology that is now driving the market up will reverse, and the former low of 7450 could become a fond memory of the "good ol' days." So, I guess my point is that economics drives perception, which in turn drives the psychology of the market. And, right now, the perception is that the Fed can save us.
So, the answer to your question is, "It beats me!"
good trading,
jim |
