Well, you know me. When I get pessimistic, it ain't for peanuts.
I would not get concerned as long as the NASDAQ stayed within the range that it has witnessed this year so far on a closing basis. It's quite possible that we will retest the 2290-2300 area but that would be fine as long as it ended up confirming a strong level of support. My fear is that people will buy the whole way down and ultimately end up puking their long positions, and consequently create the wave of selling that will yield a break of the year-to-date low, and subsequent test of longer term support at 1890-1900.
*See chart of 1998 reaction to Fed rate cuts.
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You can see where the Nasdaq 1900 level comes into play.
Remember back in '98 when the media and the economists doubted the FED's ability to lift the global economy out of the rut created by the Asian financial crisis?? Everyone and their mother was scared to death of the ramifications of a global recession. The Nasdaq tanked nearly 20% after the first rate cut, but then rallied back hard, never to look back. The capitulation that took place in the broad sell-off helped to fuel the rally that did not die until March 2000.
I was kind of hoping that we would have seen a similar reaction this time around. Unfortunately, the FED caught everyone by surprise, and we got one hell of a knee-jerk rally after the Jan 3rd cut. And since then, the Nasdaq has been relatively stable, with an upside bias. History never repeats itself perfectly however. Do we tank after the second rate cut this time?? Well the media would sure love that as that's all they have been harping on.....Recession, YES! should be their damn slogan on CNBC.
But hey who knows? I have a ton-o-faith in AG and Bush. From a long term investor's perspective, it's hard to look at the current situation knowing that aggressive rate cuts and fiscal stimulus are in the pipeline, without wanting to "load the boat" or "back up the truck" on every dip. Think about the privileged few who lightened up last year in technology. They are accumulating now. Anyone with cash on the sidelines is accumulating now. Easy money policy and tax cuts will make the pool of available funds for investment larger in the coming Q's.
These are a few of the things that rallies are made of.
Best
-B |
