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U.S. Stocks: A Chicken With Its Fed Cut Off?
Please read over the following news items from Tuesday, December 16:
- "Rate cut sends stocks soaring. The Federal Reserve's record setting rate cut launched a buying spree that pushed the DJIA up 359 points. All in all, it's good news for stocks." – USA Today
- "US Fed cut dispels deflationary fears." -- AP
- "A big, widespread, explosive, incendiary shell has come out of the Fed's cannon. It's a big bloody deal. This is the kick-it-up-a-notch moment." -- Bloomberg
And now, this clip from the morning after, December 17: "Stocks slide as rate cut euphoria subsides…US stocks fall on concern the Fed is running out of ammunition to combat the recession." -- Bloomberg
So: either the U.S. stock market is crazier than a chicken with its head (or Fed) cut, off... Or, the Central Bank does NOT control the long-term trend in the financial markets.
Well, in reply to that either-or, the September 2007 Elliott Wave Financial Forecast brought in the following historical close-up of the Fed's long-standing impotence against bear market forces and wrote:
"History says quite plainly that any near-term positive response to a Federal rate cut will be short-lived. The initial burst of enthusiasm for the August 17 cut confirms this view. "
(Rate Cuts Won't Kill The Bear: No amount of monetary easing can stave off the forces of deflation. Only an upturn in mass social mood can. Right now, the 2008 Financial Forecast Service reveals whether that time is nigh. Act Now)
One month later, the October 10 Short Term Update foresaw that despite the Fed's renewed rate-cutting campaign, U.S. stocks would keep their bearish promise. In STU's own words: "More pieces of the topping puzzle continue to drop into place… Watch Out! The market's favor a stout correction, with the potential for more bearish behavior."
The next day, October 11, the Dow Jones Industrial Average took step one DOWN from its all-time record high in a powerful, 30%-plus sell-off to five-year lows – all the while, the Federal Reserve slashed its overnight lending rate 10 times (500 basis points) to the record low .25% to 0% "target range."
And, as the just published December 15, 2008 Short Term Update observes: the three-month US Treasury-Bill now yields a Japanesque .01%.
All the arsenal in the Fed's armory – rate cuts, cash infusions, and bailout rescues – it's all being deflected by a market that has long since made up its mind. Stay in front of the biggest changes to come today. Click here to begin.