Another Fed Pump

$200 Billion Buys Market Bounce

By Bryan Bottarelli
Tuesday, March 11, 2008 9:54 AM EDT
Tue, 11 Mar 2008 13:54:00 GMT

Dear Bottarelli Research Member,

As you know, the Fed expanded their emergency lending program this morning — lending up to $200 billion of Treasury securities — all in an effort to provide more liquidity to global financial markets. As I hinted in yesterday’s alerts, it was only a matter of time before our friends at the Fed made a market-stimulus move, and today’s action certainly fits that description. As I write, the Dow is trading 263 points higher, followed by the S&P 500 up 28 and the NASDAQ up 50.

INDU

Now, like I’ve mentioned in previous intra-day alerts, I don’t like these sizable early-morning moves. More often than not, you see each early morning directional moves (either up or down) reverse course sometime within the trading day. So today, the big test will be whether or not today’s big morning jump can sustain itself throughout the entire trading session. If these gains DO hold, then we could be looking at a market that’s established a floor. If these gains DO NOT hold, then we’ll be looking at a re-test (or breakdown) below the January 2008 lows.

Until we know more, the smartest course of action is to carefully monitor the action from the sidelines. It’s nearly impossible to play these opening-session pops (or drops), so let’s see how the market reacts to this new stimulant. That’ll help dictate our next trading moves. Until then, maintain your current positions. And as always:

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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