I think you fade this rally. The only news to come out today was very negative: consumer confidence came in at 38%, vs. the expected 52%. This was a record low. The Case-Schiller home price index dropped by a record amount as well. Other indicators looked bad as well: the CDX (an index of the credit quality of investment-grade companies, as measured by the price of their credit default swaps) was roughly unchanged, 10yr notes were only a little bit lower, the yield on 2yr notes is still a ridiculously low 1.6%, the primary mortgage rate remains well over 7%, etc.
So the question is, what good news drove this rally? I can't think of any. I think you sell stocks here.
The biggest risk is the Fed meeting tomorrow. The market is expecting a 50 basis point cut in the Fed Funds target rate (currently at 1.5%). If the Fed only goes 25bp, there will be a huge selloff. If the Fed goes 75bp, there's a moderate rally. 50bp, I think we see a moderate selloff.
I've learned more trackable economic indicators over the last two months than I have during the rest of my life. Case-Schiller? CDX? Neat! Thanks market crash! Thanks, ctkrohn!
Can someone put together an aggregator for this stuff?
I also heard a rumor about Bank of Japan maybe cutting 0.25bps off their rate (a 50% reduction, bringing it down to 0.25bps). And that if true, it's enough to revive the carry trade for a while and pump our markets with borrowed Yen for a month or two...if, in fact, the Japanese banks have anything to lend.
I swear, one reason I read today was that there was good news for "commercial paper production." People will rally on anything, but there are fundamental problems here that stock markets won't solve.
So the question is, what good news drove this rally? I can't think of any. I think you sell stocks here.
The biggest risk is the Fed meeting tomorrow. The market is expecting a 50 basis point cut in the Fed Funds target rate (currently at 1.5%). If the Fed only goes 25bp, there will be a huge selloff. If the Fed goes 75bp, there's a moderate rally. 50bp, I think we see a moderate selloff.