The chart of BPNDX tells us that this correction could still be in the early stages. We will have rallies of course, and some very powerful ones, but the big cap techs have not dropped sufficiently to start a lasting buying frenzy. The technical damage is severe, yet the bullish percentage index for NDX only reads 62. It's very unlikely we have seen the lows.
The Feds are panicking and the market senses it. They can't lower rates, or so they think, for fear of starting a run on the dollar, so they inject more money into the system. I think this is a mistake. A rate cut might help avert a recession and that is always supportive in the end. This is not the time to play tough. After all, it's not like we would be cutting from 4%. Europe has much lower rates than us. We could be staring at deflation pretty soon and by then, lowering rates would be too late. Do a quarter now so we don't have to do an emergency full basis point. Now that would be scary.
One last thought: why are the Feds and central bankers around the world freaking out like this? Do they know something we don't? After all, it' s not like we haven't seen a 7% correction before. It's like calling 911 because you can't start your car. Freaky stuff.
This entry was posted
on Saturday, August 11, 2007 at 8/11/2007 04:15:00 AM.
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