Second lowest yield Currency USD

3/18/08

The Federal under delivers. With just reduce .75%, Federal is playing dangerous game and do not expect the market strength to last too long. They are delaying the inevitable with a statement still concern about the downside risk of the economy. They have done a lot over last 30 days. Since February, they cut interest rates to 2.25%, brought the discount rate down to 2.50%, open up new lending facility to primary broker dealers, announced be auctioning up to 200 billion, expanded the collateral to take investment grade debt securities. In addition, the fed bail out Bear Stearns with lending 30 billion worth of Bear's less liquid assets to JP Morgan. I suspect the reason that Fed only make 75 basis point cut that they want to leave window open if they need to give another surprise rate cute before next schedule meeting ( April 29th & 30th) in case another big trouble come out.

Technically, Dow is closed above the 12250-12300 level which is very bullish. But, with VIX is going close to 22( Today VIX index is close at 26) and expect market would be top if up another 300 point( near 12750 +- 50 points). Financial and banking stocks are bouncing strong because they have been beaten too much in very short period of time. Also, traders want to build a good atmosphere for the biggest IPO in US history the Visa company debut tomorrow.

Final, I still remain bearish for the stock market as well as our economy. One big gain day do not solve the problem. Otherwise the Federal does not need to work everyday( even on weekend ) to eliminate the credit financial crisis. Let's see how market perform tomorrow.