EMERGENCY!

by Larry Levin

I must have been dreaming early this morning because my slumber wasn't interrupted by the alarm clock, but by something out of "The Hunt for Red October:" DIVE CAPTAIN...EMERGENCY - DIVE, DIVE! The stock market was diving for sure, submerged well below last week's close and locked limit at one point before the open. Although the Fed is meeting next week, it made an emergency cut this morning.

Although stocks fell for a fifth straight session, they recovered most of the early massive losses before the close. The rout was sparked by a global sell-off that saw the French exchange drop - 7.0% in one day, and India's Sensitive Index down -16.0% from Friday's close. Investors were able to cheer, however, from a massive emergency interest rate cut by the Federal Reserve Board of 75-points.

The slash of the federal funds rate from 4.25% down to 3.5% marked the biggest cut in this target rate for overnight loans on records going back to 1990. It also marked the first time that the Fed has changed rates between meetings since 2001, when the central bank was battling the combined impacts of a recession and the terrorist attacks. In my opinion it also means the Fed believes the economy is in recession.

"The committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks," the Fed statement said. Many traders believe...no, expect...another 50-basis cut next week at the regularly scheduled meeting.

Not everyone agreed that this was the ointment that would cure the markets ills (just put a little salve on it): "This is a cure for the wrong disease. It makes everybody feel good, but it's not going to have any ongoing benefit," said Daniel Alpert, managing director of Westwood Capital LLC. "We need to get ourselves out of a mountain of debt and overvalued properties."

Following Mr. Alpert's lead, I wonder how lower rates can help this time. If homeowners' McMansion's are worth 10%-20% LESS than a year ago, how will they be able to refinance at these lower rates in order to keep spending money they don’t really have on things they don't really need? After all, how many plasma TV's does one really need?

"People are up to their eyeballs in debt, and they're being asked to borrow more," said Mike Schenk, senior economist for the Credit Union National Association.

Whether Americans go even deeper into debt is still in question. However, dismissing it out of hand is as dangerous as underestimating the shortsightedness of the voting public. So it could happen.

In the mean time we had a strong recovery from the low on extremely heavy volume. This should carry forward at least a few days, possibly reaching the 1380.00-level in the S&P March futures. You might think the terrible Apple nose-dive after the close (-14.0%!!) would keep the market from rallying, however, you would be forgetting next week's Fed meeting.

Not only will the Fed slash rates next week, but it sounds like others will join in. Other central banks across the globe are being cajoled into playing follow the leader. Not to be outdone, G. Dubya announced that his fiscal stimulus plan isn't necessarily capped at $150-billion...so expect that to double soon. Here's a thought: Won't the government have to BORROW that $150-$300-billion before it can "stimulate" us? Whether the markets flowers into a true bull market or reverses from a higher perch than todays, I will follow the market and make no assumptions as to what "should" happen.

Real Time Trading Signals*for

Trade Date: 1/22/08

E-Mini S&P Trades*
(before fees and commissions):

10:19 VA Buy 16.75 =-1.75 all

10:32 OTF Buy 06.50 = 1.50 all

2:07 VA Buy 16.25 = +.75, +2.00, b/e

2:31 VA Buy 15.75 = +.75, +.50, +6.50

E-Mini Russell Trades*
(before fees and commissions):

1) Buy @ 8:26am at 648.3 = -1.5 (1 lot)

2) Buy @ 8:39am at 654.8 = +5.0 (1 lot)

3) Buy @ 9:11am at 663.8 = -.9 & -.9

4) Buy @ 9:54am at 672.4 = b/e (1 lot)

5) Buy @ 10:13am at 682.7 = +1.3 (1 lot)

6) Sell @ 10:38am at 673.5 = +.2 (1 lot)

7) Sell @ 10:59am at 673.7 = +1.0 & -.8

8) Sell @ 11:07am at 676.5 = -1.3 (1 lot)

9) Buy @ 11:19am at 675.8 = +1.0 & b/e

10) Sell @ 11:50am at 675.2 = +.5 (1 lot)

11) Sell @ 12:00pm at 676.2 = -1.2 (1 lot)

12) Buy @ 12:06pm at 675.9 = +2.3 (1 lot)

13) Sell @ 12:37pm at 676.6 = +1.1 (1 lot)

14) Sell @ 12:49pm at 674.3 = -1.2 & -1.2

15) Sell @ 12:52pm at 673.9 = +.2 (1 lot)

16) Sell @ 1:10pm at 672.7 = b/e (1 lot)

17) Sell @ 1:35pm at 672.2 = +.6 & -.6

18) Buy @ 2:01pm at 672.8 = +3.5 (1 lot)

19) Buy @ 2:09pm at 675.2 = -1.0 (1 lot)

20) Buy @ 2:27pm at 674.0 = b/e & +1.8

21) Buy @ 2:40pm at 677.6 = -.9 (1 lot)…+$700.00


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