So how many believe the Feds' move today saved the Stock Market from crashing?

[Postman]

I guess my S&P 500 Mutual Fund is safe for another day....

[DemocratInSoCal]

1. Not Only That....

It caused it to go up over 400 Points.

What the fuck is up with that?

[kirby]

2. No...

The Fed just swapped $200 BILLION in cash for mortgage security paper which still has a large correction remaining. $200 Billion corporate bailout, if you ask me.

[enid602]

6. phony

Phony money swapped for phony assets. Seems like a fair trade to me.

[Greyhound]

37. Bingo! We have a winner!

[CC]

3. Temporarily or permanently?

Maybe stopped it for a short while but doubt it will be permanent.

[femrap]

30. Program ends 9/08. nt

[0007]

4. I'm checking in. No doubt about it!!

They've been at this business for several months now. Nothing new! JUst fire up the printing machine.

[ProdigalJunkMail]

5. sacrificing tomorrow so today can look ... ok

nothing more...

sP

[Postman]

10. "Tomorrow" meaning when a Democrat wins the WH?

I get an eerie feeling they're trying to slow-walk this hobbled stock market past the election and then let it all fall to pieces.....

But what do I know....

[ProdigalJunkMail]

19. they are certainly up to something

i am not sure it will be able to hang on that long...and let's face it...WHOEVER the next president it, there will be hell to pay. It will take years to undo the damage that has been done to the dollar!

sP

[lapfog_1]

7. When that gets written off, it will be another inflationary moment.

well, it already IS...

[Birthmark]

8. They just put off the day of reckoning.

They've been playing for time for a while now. They're hoping that some piece o' economic magic will rescue the economy. Magic is in very short supply...even in the age of Reaganomics.

[Captain Angry]

9. I don't think there was anything out there that would make today a market crash.

We have some serious issues, but nothing has changed recently that should dramatically affect the market in a bad way.

If we hit Iran, yeah, that would wreck things. But barring that or any terrorist activities here in the USA/Europe, I think the markets will shake themselves out. Up days, down days.

[lonestarnot]

11. And w/o hijacking this thread:

Your thoughts on hitting Iran?

[Captain Angry]

12. It's troubling (to steal the administration's term)

that Admiral Fallon has resigned. He had made statements about not supporting a strike on Iran.

Bush has said multiple times that he wants them smacked before he's out of office since he doesn't want to hand it off to somebody else.

So, we'll see.

[lonestarnot]

21. And darth's visit next week?

[Captain Angry]

23. VP Cheney's visit to the region.

It's being billed as the administration's latest attempt to prod the peace process in Israel and the surrounding area.

We'll see what actually comes out of it.

[Speck Tater]

15. Nothing changed the day before Oct. 29, 1929.

Actually, nothing changed today to make the market go up. The FED simply announced it's plans. No actual FED money has changed hands yet. There's all the paper work to do yet. The market was driven up by optimism, not by anything real. When the optimism wears off in a few days, it will be right back down again. After all, that optimism only bought back about half what the market had lost in the week before, so it's still down from the same time last week.

Look for the DOW to be down by 50% to 60% or more by the end of September.

[Captain Angry]

17. If I understand you...

You're saying that in 6 months, 30 of the biggest companies that trade publicly will see their value cut in half. That they will be trading for nearly half of the value of their assets.

Even if the US economy does tank, unemployment does jump dramatically, etc., those companies are still so international that they'll do ok.

If all hell breaks loose, and spending stops in the USA, it will definitely hurt those companies, but I don't know what would have to happen in 2008 for them to lose 50% of their value.

[louis-t]

16. The market is a house of cards imo.

I'm no expert, but it seems that corporate stocks are only going up as corporations downsize. News of 10,000 layoffs at GM or a factory closing send the stock up. They are not selling more product, but their overhead went down. Ford stock went up because they didn't LOSE as much money as predicted. No one here is talking about how infusing billions (several times this year already) is affecting the dollar, price of oil, etc. No crash likely, but wild swings and a downward trend, I believe. Current money infusion is a temporary fix that will be outweighed by negatives.

[femrap]

31. There are some very big banks

out there who are teetering....don't think the Saudias wanted to invest more in Citicorp. Remember there are $45 Trillion in derivatives out there.

[Greyhound]

38. $400Trillion. 900% of the world economy.

Such a bald-faced fraud of such magnitude must inevitably destabilize the whole global Ponzi scheme.

[femrap]

46. I have a difficult time

trying to plan for an existence when this comes crashing down. It'll be like early 1900's or earlier, I guess. But so many more millions of people.

[Greyhound]

50. Real stuff will have real value. The fiat currency that has most people

convinced that they'll be alright when the crash comes is what will wake them up to the real situation. All the paper millionaires will discover that all they they sacrificed, for so many years, too accumulate is nothing but a pacifier to hide the fact that their master has stolen their lives.

That is when things will get really interesting. Let's hope it doesn't happen in our lifetimes.

[femrap]

51. I got a feeling we might get a taste of it...

I tell young people to think very carefully about having children.

[murray hill farm]

13. Yep...safe for another day!

But, that is about it....this just prolongs the crash that is coming.

[selador]

14. false question

the stock market has already dipped WELL off its highs, and down 7%+ in the week prior.

iow, it was oversold.

people always look for excuses for price action (fed etc.) but the reality of the market is NOT the news, it's the market's REACTION to the news. that's one of the first things you learn as a trader if you want to make money. the market can remain irrational longer than you can remain solvent with your opinion of what it should do.

most indicators (bullish percent), VIX, TRIN, COT reports, showed good probability of a bounce GIVEN an excuse/trigger. today, the fed was it.

remember also, that RALLIES ARE SHARPEST IN THE CONTEXT OF A BEAR MARKET

that's counterintuitive for many investors, and it's also what makes bear markets hard to trade for those with a mentality steeped in bull market dynamics.

on any given day, the stock market CAN crash. it's chaotic, dynamic and fractal in its nature.

but yes, a good general rule is - don't fade the fed.

the market has corrected. whether it will crash or not is beyond anybody's knowledge or control, despite what anybody thinks.

that's because emotion is the ultimate ruler of the markets in the short term - it's what makes it so eminently tradeable.

the dynamics of the overnight rally were a fair bit of speculative (new ) buying, but also a large %age of short covering. many of these were "new" shorts that AS USUAL tend to get short near the end of the downturn (retail traders trying to sell weakness). invariably they get stopped out which fuels more buying demand and creates an "ask vaccuum" in the thin premarket futures tape.

once the market opened, the classic "sell the gap up" began, which has been a solid moneymaker since well before christmas (i generally fade up gaps if they aren't pro gaps, but never has it been easier to do since this bear market started. iow, a higher win %age).

the market DID find support though (imagine that - support!!! in a bear market) at a 62% retrace which is the classic technician's line of demarcation between a buyable pullback, and a trend shift.

so, as we found a bid there, confidence came back in and WHAM - all the late shorts got crushed again

we did see a significant amount of initiative buying, and that's a sentiment thang totally.

in short, there is NOTHING the fed can do to SAVE the stock market from crashing. but given their news, they certainly prevented it from happening TODAY at least :)

market prattle mode - OFF

[slipslidingaway]

28. What is a pro gap? TIA n/t

[selador]

32. pro gaps

pro gap is short for "professional gap"

a pro gap is a gap that is so called because professionals (institutions) create it by getting long pre-open (or aftermarket, or overseas) and then continue to run the price action up

iow, it's a go WITH THE gap situation.

if the price has gapped up, you would go long, whereas with a standard gap, you go short an up gap and make money off the decline.

i am speaking specifically of index futures (dow almost exclusively).

i don't have a consistent methodology with individual stocks to judge whether or not the gap is pro or not.

with the dow, you have a price weighted index of 30 stocks, and thus the gapfills are more reliable (statistically speaking) as a fade.

symptom wise, a pro gap in the dow is best ferreted out by checking premarket volume, WHERE the gap ran to (right into resistance or where?), is the gap above the previous days' price action and.or yesterdays value area, and the price action immediately upon open (are tick spikes facilitating upmoves in the dow for instance).

certainly not an exact science, but i try to have as many statistics as possible to make the decision to fade or not, more predictable.

overall, 72% of gaps fill (in the dow) in the course of the trading day.


last i ran the stats.

[slipslidingaway]

42. Thanks for the explanation...

since I do not have futures charts it is difficult to follow along.

At least for me they are all pro gaps :)

[selador]

44. DIA works

if you want to track what the dow futures are doing you can track the DIA etf (dow jones ETF).

it moves point for point with the futures, although it is offset a few ticks

right now, it is 12 ticks about the futures, that's cause of fair value (DIA gets dividends, futures don't, etc. so there is a fair value offset that diminishes day by day as futures approach expiry)

but in brief, if the DIA moves .10, that's a 10 pt move in the futures, so you can see what the moves are.

you can use SPY for S&P futes

as a proxy as well.

fun to watch

also, even if you are trading individual stocks, it's always good to watch the market indexes (DOW, Q's, Nasdaq, Russell, S&P) to see overall market supply and demand.

approximately 2/3 of a stock's movement (individual stock) is correlated to the overall index movements. less so for very speculative stocks, moreso for stocks like GE etc.

[slipslidingaway]

45. Thanks again and you are so right about watching the overall

market trend and there were some signs of trouble in the summer and then into the fall.

[selador]

47. yup.

i trade index futures almost exclusively (i invest in stocks, bonds, etc. but prefer to trade index futures).

as you know, you can really improve your trading, (swing or intraday) and to a lesser extent your investing by paying attention to what the various indexes are doing, since they are proxy for supply/demand in their relative domains.

if yer a value or contrarian investor, you might look for sectors that are beaten down (XLF is the ETF that tracks the bank index for example), then use fundamentals or technicals to screen individual issues from there.

a momentum or more technical trader might look for relative strength, or retracement to support in an index and then look for high beta momo players to jump into and ride the wave up

[slipslidingaway]

49. One must be disciplined so they can trade another day...

I'm just interested in keeping our IRA moving in the right direction and TA definitely does help.

My interest started in late '99 with a view towards trading, but that suddenly diminished after reading a few books and websites. Feeling very uncomfortable with the stock market in March 2000 I decided to protect the gains of the 80's and 90's. Reinvested some money in 2002 and 2003 and then saw the negative divergences which began to develop this year.

Buy and hold was great during the 80's and 90's, but I think we might be in for a period such as the
60's and 70's where we basically went sideways with some large swings.

Appreciate the TA perspective, whether short term or long term.

:)

[On the Road]

41. Thank You for That Thoughtful Response

The market was very oversold, but volume is low, the gap didn't fill, and the indexes are still below the 13-day averages and trending down. VIX was only 28 IIRC so it did not seem like a selling climax.

Were you saying that the 62% retrace increases the liklihood that this is a "buyable pullback"?

[RainDog]

18. I thought Wall Street was celebrating Spitzer's downfall

irrational exuberance, all that... gathering rosebuds while they may...

but I don't know nuthin about how the stock mkt. works.

[NightWatcher]

20. just trying to delay it for bush until the Dem takes over

[ThomWV]

22. By friday you'll never know it happed

[leftofthedial]

24. dig the hole deeper, inflate the bubble bigger

bail out another uber-wealthy capitalist or two

[Mike03]

25. Please help me understand....

Didn't the Fed actions today only support further inflation, or re-inflation, of the debt bubble? Aren't they simply encouraging banks to make more of the same loans that got us into this jam in the first place?

I'm confused about what was accomplished today.

[femrap]

33. It is helping to bail out the

banks who made loans that they shouldn't have....to people/corps who were bad/high risk. So the Federal Reserve and buddies will give 28 Day loans of Treasury Securities...instead of just overnight loans like usual. This is unprecedented. This is Bernake's second little idea to try. I call this plan, 'OK, We'll Throw more $$$ at the problem and let it stay longer.' They gave it some name....TSTF, I think....that would be 'too stupid to function.' lol.

Some of these big banks are looking like they are ready to belly up. The Federal Reserve (which has NOTHING TO DO WITH OUR FEDERAL GOV'T), Bank of Canada, Swiss National Bank and Euro Central Bank put this new little plan together.

Also keep in mind...no one in the world wants Dollars. Everyone is trying to 'de-couple' from the US and its worthless dollars. Just wait til OPEC decides to sell oil in Euros!

'Free' Markets, my ass....totally manipulated and the taxpayer stuck with the bill. As always.

[Greyhound]

39. And here's another winner. n/t

[NashVegas]

26. A Nice Delay

Good for maybe a week or two.

Once the big boys have all liquidated, we won't have this happen again.

[ScreamingMeemie]

27. I believe the Feds move is just another four spaces in a board game.

A board game that nets the very rich and costs the ones who believe in it most.

[femrap]

29. It simply postponed the inevitable...

while putting the screws to the middle, working and poor classes by decreasing the value of the dollar...this is the BIGGEST TAX OF ALL. What cost $1 this week will take $2 next. Flooding the world with useless dollars.

And they say that our markets are 'free.' Manipulated by and for the Extremely Wealthy Elites.

This was unprecedented today...it's just going to make the crash worse....watch out in October!

We're so done.

[spanone]

34. these criminals are running out the clock

they are going to dump a heaping pile of shit on the presidential winner.

[Recursion]

35. It's a lot like the SNL bailout

Use tax money to stop the bleeding long enough for the bigwigs to get their assets somewhere safer.

[JackRiddler]

36. Please read this, I think it might be connected...

The Bushies didn't bring down Spitzer - a "large New York bank" did.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x2995172

[magellan]

40. Payoff?

Or maybe I should say instead "Payday".

Would that we all could have our backs scratched by our munificent Fed the way corporate elite do. But that would be - eep! - socialism.

[TML]

43. I Don't

It only held off the inevitable. Anyone want to bet that the Fed will prop up the economy long enough so it crashes in 2009?

[scarletwoman]

48. Isn't the Fed basically pulling money out of thin air? (or out of its ass?)

I mean, none of this money is "real", right? It's just all numbers being shuffled around, right?

We're going to end up having to cart worthless dollars around in wheelbarrows to buy a loaf of bread if this keeps up, it seems to me...

sw

[gravity]

52. The Fed concern is the economy

And right now the credit markets are falling apart do to a lack of volatility. Basically banks have to sell good bonds to cover the losses in the bad ones the took, and there isn't enough liquidity in the market, since they have a hard time selling the bonds.

The Fed's moves are is to help provide liquidity in the markets so that AAA bonds, which are high quality and low risk, are able to be sold at a fair value.

Having healthy credit markets is essential to the economy, so this is a good move on the Fed. The Fed actions are supporting the quality bonds, which have been taking a hit from the problems from the bad ones.

The stock market is governed by emotion than facts most of the time, so it isn't what the Fed is basing its decisions off of.

[magellan]

53. How do hedge funds figure into it? Because they're "snapping like twigs"

...in spite of the $200 billion.

I'm cross-posting this from LBN and the economy forums:

Hedge funds on the brink as US Federal Reserve cash fails to ease crisis

Several hedge funds with assets of more than $4 billion (£2 billion) were on the brink of collapse last night or had halted withdrawals, despite moves by the US Federal Reserve this week to ease America’s deteriorating credit crisis with a $200 billion collateral lending facility.

The potential closure of six funds came as a leading private equity executive, who declined to be named, said that such funds were “snapping like twigs”, with one failing every day.

Yesterday Patti Cook, Freddie Mac’s chief business officer, predicted that the Federal Reserve’s $200 billion bond lending facility this week would fail to solve the long-term problem of Wall Street’s deepening credit crisis.

The funds’ predicament – seven funds have been frozen this month – was seen as evidence that the initiative by America’s central bank to allow lenders to swap their risky mortgage-backed bonds for safer Treasury debt, will be of help only in the short term. Those fears hit the dollar and New York equity markets, with the greenback falling to a new low against the euro and sterling, as the European currency hit $1.55 for the first time.

more: http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3542723.ece