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Written by Jim Patterson
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Tuesday, 30 October 2007 |
Here’s the Deal:
Two steps and a tumble & Two tumbles and a
jump. The old adage amounts to two fed moves in the same
direction will spur a market reaction. Last night I read an
excellent report from Merrill Lynch discussing how two rate
cuts typically spark a rally with the S&P 500 reaching a
notably higher level (over 30% higher on average) at some point
over the ensuing 12 months. There was just one minor yet
critical detail in all their bullish jargon they failed to
mention.
The applicable rule is essentially that when
the Fed lowers rates twice (Discount rate, Reserve Requirement,
or Margin Requirement) the market is set for a rally. According
to the report there have been 21 signals since 1914 with a 22nd
signal last month. The S&P reached a maximum gain of over 30%
on average within one year. After only eight of the 21 signals
did the S&P 500 fall more than 5%, and only 4 signals were
followed by a decline of more than 10%. The two worst were
signals in 1929 and 2001, which are arguably the only uber-bear
markets of the past 100 years.
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Written by Jim Patterson
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Monday, 29 October 2007 |
Here’s the Deal:
The person that schedules FOMC meetings is
either really smart or really dumb, I just can’t figure out
which. The schedule is set over a year in advance. Meetings on
the last or first day of the month are rare. Of the last 121
FOMC meetings only 8 have been on the first or last day of a
month. Throw in the fact we get the advanced Q3 GDP report that
morning and the 31st is the last day of the year for
many mutual Funds, and it is safe to say we have a unique
confluence of events to shape the week’s trading activity.
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Last Updated ( Monday, 29 October 2007 )
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Written by Jim Patterson
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Sunday, 28 October 2007 |
Here’s the Deal:
Our very short-term cycles call for a high on
Friday. So far the S&P is tracking the very short-term cycles
in that it has rallied over the course of the week. A very
short-term high should be developing very early in the week.
However, there are a number of mitigating factors can
potentially disrupt the very short-term cycles, the end of the
month, anticipation of an FOMC rate cut on Wednesday, and of
course earnings reports.
The Dow is tracing out a sharply rising wedge
pattern. There are two ways this thing resolves its self.
Either prices really accelerate higher from current levels
(13,750 – 13,800) thereby establishing a clear impulsive
pattern to the upside, or, once the buyers exhaust themselves
we will see a very sharp break to the downside. Considering the
economic backdrop a quick surge higher seems less likely. A
close below 13,750 will indicate a break of the sharp uptrend.
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More...
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TTO Friday intraday comment
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TTO Daily Update 10/25/07
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TTO Daily Update 10/24/07
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TTO Daily Update, 10/23/07, a counter-trend move
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TTO Daily Update 10/22/07
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TTO Weekend Update 10/21/07
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TTO Daily Update 10/18/07
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TTO 10/17/07
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TTO Daily Update 10/16/07
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TTO Daily Update 10/15/07
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