The Deipnosophist

Where the science of investing becomes an art of living

My Photo
Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

17 August 2007

Back to the drawing board

I receive many messages this morning that read, in part, "Praise be the FRB! Today's discount rate cut kick starts the markets' rally..." -- which could not be farther from the truth.

Today's action by the FRB does not, by itself, cause a reversal (up), but does exacerbate the short term up trend that kicked into gear yesterday.

Please recall that traders had their signals, purchased yesterday at varying points based on each trader's objectives, and would likely purchase more shares today based upon tick by tick data. Today's news reverses the previous trend: the sellers suddenly stand aside, as the buyers crush the doors attempting to get into this (new) market trend. Its duration, however, remains to be determined.

So, to reiterate, today's FRB action merely exacerbates what was to occur anyway.
-- David M Gordon / The Deipnosophist


who's online