Hi, Velo. I was talking about the NEWS of the FED moving to a position where they would feel the need to drain the markets of liquidity. Now you are absolutely correct that $3 billion is nothing on the larger scale. . . but with Greenspan not giving any promises of more rate cuts, then news of the FED draining reserves before the markets experience a recovery. . . .the combination, IMO, did much damage to already shaken investor sentiment. [The markets have historically tended to track liquidity charts.] And I think that many investors were looking for the FED to throw us a bone yesterday. . . .[though those that know better, knew Greenspan would say nothing].
Instead, we got no news. . . we got the usual negative spin by the media. . . and as your link clearly shows. . . .after an extended period of ADDING liquidity, the FED turns on the markets. . . and begins to drain. The feeling changed from the FED on the side of the Bulls. . . to the FED moving back to a neutral position. . . or even a possible lean back away from helping drive a recovery.
The last week of January, the FED actually DRAINED liquidity by 11.7 billion: biz.yahoo.com
Yesterday's 3.1 billion was the largest yet of the single day drainage reports, indicating an overall move toward draining of liquidity. . . . and it implies that the first week of February will also show more drainage. Personally, this trend has me more concerned than interest rates.
The FED moves affect investor psychology. . . which in turn moves the markets. "Don't fight the FED". So I believe that in an INDIRECT way, yesterday's FED shift toward draining liquidity was a sort of last straw for many investors. . . .a bit of capitulation, perhaps.
The positive spin to this move toward drainage. . .is that perhaps the FED is helping to FORCE a final capitulation period. . . .which seems to be absolutely necessary before the sidelined money begins to flow once more. . . Sort of a rocking the car back and forth to help it out of the mud.
I hope that clarifies my concern.
Rande Is |
