My Thoughts on the Fed Statement

The FOMC Statement released by the Fed this afternoon undoubtedly drove the market today. The market was basically flat, as it always is, prior to the Fed release, but once it came out we get the same thing that we almost always get, which is a hard reaction initially in one direction (which was up today) proceeded immediately by a charge in the opposite direction which holds for the duration of the session.

Today we got the a rally right out of the gates, then immediately thereafter the market sold-off for the rest of the day. Bears are undoubtedly relishing in what took place today and will say there is a change in the mood (I’ve been in those shoes of late – I know what they are thinking!) but tomorrow will show the true reaction to the Fed Statement. Of late, if the market sells-off on the Fed Statement as it did back in August, then the following day, the news is interpreted a little differently, and the market then changes into rally-mode.

Today the market didn’t like the fact that Bernanke and Co. is looking at wrapping up its efforts with helping out the banks with their bad debts. But tomorrow, who knows, investors will see it as a reason to believe that banks must not be as bad off as originally expected if the Fed are looking at withdrawing their aid to them in the near future. So tomorrow, I’m going out on a limb and saying that we rally on a new perspective of what the Fed had to say about our current economic situation in their FOMC Statement, despite the fact that the market had an unfavorable reaction to it today.