Fed induced volatility | stockbee

1/31/2008

Fed induced volatility

  • Fed decision days tend to be volatile and more so in bear market. Yesterday was classic example of that.
  • The market had a full up and down cycle within hours of the decision.
  • Normally the real impact of Fed decision manifests itself by 3rd day.
  • With lot of stimulus in pipeline , it should impact the market positively in the long run.
  • However in the short run, this market is still tricky.
  • When leaders breakdown severely, like we have seen in past few days, it is not easy to put together a rally. It takes time. Plus the old leaders are not necessarily going to come back, a new leadership will emerge. The new leadership becomes apparent only after the selling phase stabilizes.
  • As of now in this market the fast selling phase ended on 1/23/2008 with a 900 plus day. Since then market has attempted to put together a small rally, now we will see if the market holds up well. As of now it is the line in sand. A long side way move or a volatile range might be better for the longevity of next bull phase. However markets do not always act as per expectations.
  • The bottom-line is that this market phase as indicated by Market Monitor is not ideal for growth or momentum based strategies on long side if your holding periods are more than few hours or days.
  • Bear markets are essential. In fact they are very good for growth investors. From the gloom of bear market when a new bull market starts, you find several straight up growth stock rockets.

2 comments:

Jack said...

Pradeep,

Good pts.

thanks
Jack

Jack said...

Pradeep,

But your MM doesn't call for longs just a bottom?

thxs
Jack