FED cut rates by 0.25%, Market Plunges --> $2200 profits
5 min Emini Nasdaq 100
Hi,
As always, the market is usually quiet before the FED announcement of rate policy... I never trade befoere the actual announcement itself.... You can see for yourself, how the market is range-bounded in anticipation of the FED's announcement.
14:15, the magical moment! FED announced a cut of 25 basis instead of the 50 basis expected and market plunged like hell... I could not short in time and only managed to get in at 2134.. I further shorted another contract at 2120.. and held my position all the way till the end when I exited at 2088 for $2200 profits.. Such opportunities don't come eveyday and all traders should capitalize to make a killing out of it..
Fundamentals:
NEW YORK (AP) - Wall Street plunged Tuesday after the Federal Reserve lowered interest rates by a quarter point, disappointing investors who hoped the central bank would move more aggressively to help the economy overcome the credit and mortgage crisis. The Dow Jones industrial average skidded more than 290 points.
Investors had been expecting policymakers would lower rates for a third straight time, though there was debate over the size of the cut. Most economists anticipated a quarter-point reduction in the benchmark federal funds rate to 4.25 percent, but some investors were hoping for a half-point cut from the Fed's final meeting this year and their disappointment took the market sharply lower.
Wall Street had barreled higher the past two weeks, propelling the Dow up 640 points partly on rising optimism that the Fed would do all it could to prevent the economy from slipping into recession. While the Fed indicated Tuesday it was doing exactly that, the market's expectations had run well ahead of the central bank's view of the economy and what it needed.
The Fed also lowered its discount rate, the interest it charges banks for loans, by a quarter point to 4.75 percent, making it easier for banks to obtain the cash they need for year-end obligations. Fed officials signaled that further cuts are possible if a severe downturn in housing and a crisis in mortgage lending worsen, but that was not enough to assuage the market.
The central bank did note that the economy has suffered, and that likely added to Wall Street's distress. The statement accompanying the Fed's decision said "information suggests that economic growth is slowing," and deleted language from prior statements stating that risks to the economy are balanced. But the Fed stood firm on a quarter-point cut for now, saying it believed the steps it has taken "should help promote moderate growth over time."
"Time will tell if this restores enough confidence in the system. They're saying that this with the other cuts that we have done should promote growth over time. It's a telegraph that we think this is a sufficient move to alleviate the stresses on the market," said Bill Knapp, economist and chief investment strategist for MainStay Investments, a division of New York Life Investment Management.
The Dow fell 294.26, or 2.14 percent, to 13,432.77 after dropping as much as 313.29.
Broader indexes also fell. The Standard & Poor's 500 index fell 38.31, or 2.53 percent, to 1,477.65, and the Nasdaq composite index fell 66.60, or 2.45 percent, to 2,652.35.
Declining issues outpaced advancers by more than 5 to 1 on the New York Stock Exchange, where consolidated volume came to 3.97 billion shares compared with 2.81 billion shares traded Monday.
Bond prices rose sharply. The 10-year Treasury note's yield, which moves opposite the price, fell to 3.97 percent from 4.16 percent late Monday. Gold prices fell while the dollar was mixed against other major currencies.
Good Trading to all of you!
Michael Taylor
DAY TRADE EMINI S&P 500 Futures