Stock Operator....let me ask you about the following scenario (just occurred to me): Market weakness into Fed meeting (perhaps one rally day comes before)...Greenie only cut 25 BP.....market sells off big, thinking that's not enough....starts to break down below previous lows, etc..
Now, if this were to occur, and we get a nice, big "capitulation" day...wouldn't that be the time to buy? (and mark a new bull...) Why?
I am starting to think that the big surprise may just be that earnings will be recovering a bit quicker than expected. I believe that Greenie's actions in the last month have given the market assurance that he will do what it takes. He has already mentioned (often) his fear that low consumer confidence levels can turn a small downturn into a bad recession. My point: If Naz breaks sharp down, he will pump, and pump....meanwhile, if we are only looking at an inventory correction in some industry, perhaps they will come back rather quick..
I see problems with the "better earnings/quicker" scenario in that y-o-y comparisons ARE going to be tough for Q3 and Q4...of course, we still have to cost of the California energy crises to bear....but if the market does dip to/below current levels...with Greenie pumping, and a big tax cut a certainty....history would tell you that's a buy, no? A 50 BP cut on Tuesday really ISN'T necessarily for the Fed in pumping in liquidity big-time with the repos...and can/will keep doing that (it appears), and if you recall, the moonshot from Nov. 99-March.00 was due to the repos AND NOT Fed rate cuts...
Finally, (forgot to mention)...the rapidity of this decline has caught a lot by surprise....some attribute it to the super J-I-T systems that we have now....perhaps the same works in reverse? In any event, history tells us not to bet against Fed after 2nd rate cut.. |
