Friday, February 19, 2010

Smartest thing I've seen in quite a while

Normally I don't think a thing about Stock Market analysts.  Mostly because they have proven themselves to be inaccurate and corrupt.  This guy is smart. And funny. And, did I say he is really smart?

What Can the Market Tell Us About Surprise Fed Action?

By Barry Ritholtz - February 19th, 2010, 7:15AM

As noted yesterday and earlier this morning, the surprise Fed discount rate hike has everyone guessing as to the motivations:

• Response to political pressures;

• Proof the Economy is improving;

• Inevitable ending of extraordinary accomodation;

This will be debated for a while, but the US markets will cast its verdict shortly.

Usually, I consider day to day market action nothing but noise. The exceptions come when there is an unexpected action that was not anticipated or discounted by traders.

Hence, there might be some message to be discerned if we: 1) gap down hard, then trade lower all day, closing at lows; b) gap down hard, struggle back near flat; iii) something else entirely.

The caveat is we should be reluctant to read too much into the knee-jerk reactions of millions hyperactive, adrenal-charged traders and increasingly, algo driven boxes.

Algo egos?

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