The rate cut tomorrow and the market bounce

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kiryan
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The rate cut tomorrow and the market bounce

Postby kiryan » Tue Oct 28, 2008 10:06 pm

Mostly for Corth or other economic minds.

Dows up almost 1,000 today I think. 1,000 seems to be about how much the market reacts to a 50 basis point cut, but this cut should've been priced in already. Surprising how fast the market moved if it is the rate cut. It was taking 3-4 days before to get to 1k. Seems like irrational exuberance and more people timing the market.

Analysts are trying to talk bottom, but I don't see it given the headwinds. I'd be really surprised if it rallied anymore than 350 points over the next few days... followed by another month of decline? Much much shorter if something bad comes out or if traders take their profits tomorrow or the next day.

Still I keep thinking about the volatility. Its getting more volatile which I'm thinking means we should expect another huge prolonged move. I'm guessing down another 20-30% as I can't think of news positive enough to change people's economic outlook. Most likely the catalyst will be a bankrupt retailer or dismal sales going into Christmas.

Then again we could see a 75 point cut... something unexpected, but that might cause more concern than it alleviates so a bounce followed by a decline.

Interested in what you think.
Ragorn
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Re: The rate cut tomorrow and the market bounce

Postby Ragorn » Tue Oct 28, 2008 11:34 pm

I laugh out loud when I see people on finance forums declaring that the "bear has been slain." There are STILL people out there who believe that we're in a slight correction in a lasting bull market... I think they're the ones who are buying up today and are going to get burned over the next 3-5 days.

I think we're seeing another minor upswing after a prolonged decline... lots of people chose to buy in, and then irrational excitement prolonged the climb. The short-term sellers will vacate by Friday, and the Bull Marketeers will be left holding the bag.

I opened a brokerage account today. I wish I'd done it yesterday, but it'll only be a week or two before we sink down to the 8,200 level again and I can start riding the coaster too.
- Ragorn
Shar: Leave the moaning to the people who have real issues to moan about like rangers or newbies.
Corth: Go ask out a chick that doesn't wiggle her poon in people's faces for a living.
Corth
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Re: The rate cut tomorrow and the market bounce

Postby Corth » Tue Oct 28, 2008 11:42 pm

Kiryan,

If there is one thing I've learned when it comes to the market, its that I couldn't time it if my life depended upon it. In fact, you'd probably do very well in the market if you made the exact opposite move that I made and then closed your position the next day. Why? My positions almost always go the wrong way initially.

That being said, I am pretty sure the market went up 800+ points just because it was more or less ready to. The 50 basis point cut is already baked into the cake. Today people decided that valuations were low and they threw a lot of money in. We have had such a volatile market lately that 800+ points just doesn't have the same swagger that it used to, huh?

I agree that the market will likely retest its lows at some point. I really am not sure though so I started scaling in a couple of weeks ago. I'm partially invested in energy (canadian) and some gold/silver, and the rest in cash. If prices drop I will buy more.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth

Goddamned slippery mage.
Xisiqomelir
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Re: The rate cut tomorrow and the market bounce

Postby Xisiqomelir » Wed Oct 29, 2008 7:01 pm

Fundamentals cannot support 9k. The first onslaught of layoffs has begun, and will only continue into next year. A huge proportion of our banks and financial institutions would be declared insolvent if not for the "Level 3 assets" shell game. The government agencies will finally have to admit that a recession (at the least) is on us. And the trillion or so dollars that King Hank and Helicopter Ben just printed will eventually hit the real economy and cause some hefty inflation.

Personally, I think the safest short-term bet is that this will be the worst holiday shopping season ever for retailers, and to be short on Christmas. I like the inverse ETFs that short consumer goods and services (SZK,SCC) and the RE inverse ETF (SRS).
Thus spake Shevarash: "Invokers are not going to be removed"

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Corth
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Re: The rate cut tomorrow and the market bounce

Postby Corth » Wed Oct 29, 2008 10:59 pm

Not saying it won't go down some more. Perhaps even a significant amount. However, most of the profits on the short side have already been made. I was about as bearish as they come over the course of the past 2 years but now I am starting to see some valuations that look very attractive. Which is not to say it won't come down some more.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



Goddamned slippery mage.
Ragorn
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Re: The rate cut tomorrow and the market bounce

Postby Ragorn » Thu Oct 30, 2008 3:35 am

So today was my first day with my hands in the pie. I came up 5.8% on the day by riding the wave prior to the Fed announcement. I sold in the chaos that ensued after the rate cut, and I got out before the profit-takers pushed prices through the floor.

Making money right now is about focusing and taking advantage of short-term volatility. You're not going to get any traction with buy-and-holds right now.
- Ragorn
Shar: Leave the moaning to the people who have real issues to moan about like rangers or newbies.
Corth: Go ask out a chick that doesn't wiggle her poon in people's faces for a living.
Corth
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Re: The rate cut tomorrow and the market bounce

Postby Corth » Thu Oct 30, 2008 6:18 am

Well the volatility is certainly impressive. If you can figure out a way to time it, there is quick money to be made. To me, it seems no different than walking into a casino and putting it all on black. There isn't any rhyme or reason to the action.

The way I see it, what happens in the short term is basically noise. Over the long term, valuations will reflect the underlying financial condition and expected returns of the company you are buying. I was extremely bearish for a couple of years now, and did alright (though could have done a lot better if I trusted my instincts more and didn't close positions too early). Now I am more or less neutral. I think the market can go down significantly more, which would create some incredible buying opportunities, or it could be the beginning of a sustained rally.

One piece of conventional wisdom that I buck is that you ought to diversify your portfolio. To me, the extent of diversification is a question of risk management. I'm biased towards more risk in general because of my age, but I adjust my risk appetite based upon other factors as well. I am prepared at this point to take on as much risk as I can. I'm ready to put 100% of my liquid assets into an undiversified portfolio of Canadian energy producers. Its just too compelling to me. Peak oil, likely inflation of the USD (though in the near term, the problem is actually deflation), political risk in the US, political stability in Canada, very cheap current valuations for the companies I'm looking to buy.. there is just a lot going for the idea.

My only problem is I don't know how much further it will go down, if at all, so I am slowly accumulating positions as the market decreases. I hope to be 100% invested at some point, though if it rallies before I go all in, then I won't be.
Having said all that, the situation has been handled, so this thread is pretty much at an end. -Kossuth



Goddamned slippery mage.

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