FOMC Decision Causes Long Squeeze

Talk
to me, tell me your name

You blow me off like its’ all the same

You lit a fuse, and now I’m ticking away

Like a bomb…. yeah baby

Well if Lady Luck gets on my side

We’re gonna rock this town alive

I’ll let her rough me up

Til she knocks me out

   Chorus:
(Everyone now!)

She bangs, she bangs

Oh baby when she moves, she moves

I go crazy ’cause she looks like a flower

but she stings like a bee

Like every girl in history

–“She Bangs” as performed by Ricky Martin

The market
definitely moved in a way
that would make Señor Ricky blush.

In a stunning move by the
Federal Reserve, which NASA experts at the Hubbell
Telescope
claim was foreseen as far out as the Andromeda Galaxy, the
short-term
lending rate was cut by an additional 50 basis points today.
Although
the market got what it wanted, the FOMC clearly stated that they were

reacting to a stagnant
economy that has been tormented by rising energy
prices,
declining consumer confidence, and decreasing spending by consumers

and businesses.

The central bank stated:
“Consumer and business confidence has eroded
further,
exacerbated by rising energy costs that continue to drain consumer

purchasing power and press
on business profit margins. Partly as a
consequence,
retail sales and business spending on capital equipment have weakened
appreciably. In response, manufacturing production has been cut
back
sharply, with new technologies appearing to have accelerated the
response
of production and demand to potential excesses in the stock of
inventories
and capital equipment. Taken together, and with inflation
contained,
these circumstances have called for a rapid and forceful response
of
monetary policy…the risks are weighted mainly toward conditions that

may generate economic
weakness in the foreseeable future.”

Statements like these don’t make you
want to go out and bid up stocks that
have
already moved 60-80% in the last few weeks, do they?

As a result, the hypesters on
television immediately began to focus on the
possibilities
of another 25-basis-point hike that was rumored as a
possibility
after yesterday’s horrific consumer confidence number. After both
the
Nasdaq futures and S&P futures reacted to the FOMC decision by rallying

to new multi-day highs,
the tide quickly turned as a ‘long squeeze” ensued
that
saw the Nasdaq futures implode nearly 145 points from their intraday

high.

 

Late-afternoon trading saw some
serious profit-taking in the financial and
brokerage
sectors that have been on a rampage for the past seven weeks.
Technology
also saw some intense selling in names like
(
SDLI |
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News |
PowerRating)
,
(
CIEN |
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,
(
BRCD |
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,
(
EMLX |
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,
(
CHKP |
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,
(
MERQ |
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,
(
TIBX |
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, and the rest of the
“fat and bloated” glamours. In
light
of today’s selling, I don’t detect a change of bullish sentiment yet.

For the time being, it
appears the greed cycle is alive and well and will
probably
power the Nasdaq Composite above the 3,000 level in the days to
come.

It is certainly without question that
the analyst community is determined on selling the fabled “second half
recovery” story to every sidelined dollar
that
is waiting for a green light to jump back into the market. Once those

sidelined dollars are
cleverly lured back into technology, we will probably
need
to get ready for the next leg down in this cyclical bear market.

At present, I am waiting for the
selling to abate and an opportunity to take
some
long positions at decent entry prices. Do your homework tonight and

determine where you want
to buy the stronger names that may lead the advance
back
up once it materializes. Let the market come to you, here. Don’t feel

as though you need to jump
in at the first signs of weakness and get long.
The
market has a lot of soul searching to do in the next 2-3 days and I’m

sure the action will be
volatile, to say the least.

Short Watch: Brokers like
(
LEH |
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Chart |
News |
PowerRating)
,
(
MER |
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Chart |
News |
PowerRating)

and
(
GS |
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PowerRating)
may have begun their fall from Grace.
The QQQs
may need to test 62 and hold to warrant taking longs.

Long Watch: Drug stocks like
(
MRK |
Quote |
Chart |
News |
PowerRating)

did very well after the FOMC decision.
This
may signal a flight to defensive stocks tomorrow.

Either way, don’t read too much into
what transpired today. The Bulls aren’t
going
to quit this easy. Get ready to play both sides, and trade ’em like you

see ’em.

Goran