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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: John who wrote (77061)	5/15/2001 12:02:24 PM
From: t2	Respond to of 99985

John, My feeling is that the FED is in a corner. They don't have any choice but to cut 50bps. In addition, they have to keep the aggressive stance on fighting a recession in their statement and maybe even keep the comments on monitoring the situation in the short term. Basically, keep things the same way as last month. What happens if they don't? If the Nasdaq tanks to levels below 2000; there is every possibility of going back to Nasdaq 1600 again. If that happens, what will happen to consumer confidence, investor confidence, business confidence. Greenspan will have dug himself into a deeper hole. That is a chance he cannot afford to take at this stage. Even if he sticks with a 25bp cut (slim to none chance), it may still be OK as long as the aggressive easing policy statement is basically similiar to last month. I bet he is also aware of the dangers to the economy in a post-bubble period. I realize all the bears on tech will say that it is not Greenspan's job to support the market...and that inflation will spike up etc.. etc... However, AG is very aware of the connection of the markets (especially Nasdaq) to the real economy. He cannot take the chance of further slumps in an industry that is the driving force behind productivity gains in addition to the possible loss of investor confidence which may lead to consumer confidence declining. How the market reacts to such a cut (50bp) and an aggressive easing policy statement is the big unknown but my bet is that it goes up short term. Like I have been stating for a few days, everyone expects a selloff. Under such a scenario, we may still get one but the bounce back may be quick. The strengthing US dollar is giving the FED more flexibility to continue the easing aggressively. A weak dollar would have created more complications. JMHO