Wednesday, June 28, 2006


Finally, we will have the rate decision and the “announcement” from the Fed.  The market is in a state of fear waiting for the Fed to make its announcement, fearing that there will be no end in sight for rate hikes or that the hike will be 50 bps instead of 25.  

Our opinion is that the highest probability event is that the Fed will stay the course, meaning that the rate hike will come in at 25 bps and the Fed will continue to be vigilant on inflation.  This will cause the markets to drop in the very short term, say ten minutes, before yielding to higher prices into the end of the month which of course is just one day.  We don’t think this rally is worth trading this evening due to the very balanced place the market is technically.  Know that we could easily be wrong in this estimation.  The best bet is to watch the reaction to the market to get a good sense of what is going to happen.

We think there is an outside chance that the Fed would Finish its rate hikes with a quick 50 bps hike at which time they will announce that it probably is the last one.  This would be extremely bullish in the very short term, maybe a week, which happens to be the strongest period during the month anyway (not to mention it’s a holiday weekend).  

The other probabilities just don’t seem worth talking about so…it appears the Update is bullish starting around 1:15 CDT and going to about Thursday, July 6th, at about 10:00 CDT.  We do not recommend buying anything for that rally, just be prepared to unload some stock when we get close to the end of this next rally.  

If you feel the need to buy something on Thursday, make sure you are only committed to it for a very short period of time.  If you make a quick 5% or so, take it.  Just set a good trade up and get in and get out, don’t look back—profits are profits.

We’ll be back tomorrow for analysis on what the Fed did tomorrow—does that make sense?

Be careful out there…

Dow Industrials:  10,973.56  +48.82
RYVNX:   22.61
RYAIX:  24.45
TLT:  83.23
BEGBX:  13.19

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