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Tuesday, December 11, 2007

Temper Tantrum

When you were a kid, did you ever have a playmate who had tons of toys, and you played with him so you could play with his toys? And everytime he didn't get his way, instead of negotiating, he just picked up his toys and stomped away? Today sort of reminded me of that. "Give me 50 basis points or I'm taking my money and going home". I heard Cramer is blasting Bernanke again. Well, gosh, Jim, I'm sorry, but it is not the job of the Federal Reserve to bail your ass out.

The SPX tested resistance at 1520, even breaking through briefly, but then the Fed poured cold water on the party. It blasted through 3 support levels, finally finding some support at 1475. From a technical standpoint, the rally has not been broken yet, From here, 1490 is again going to be critical resistance. A close below 1460, and the rally is dead.

2725 was briefly broken through on the Nasdaq. Looks like the 2600-2610 area is critical support here.

My beloved Russell 2000 got hit bad. 760 might provide support here, but 750 looks more likely.

I was thinking today (I know, bad idea) about this rally in the dollar. I know FOREX traders are generally pretty sophisticated, and I thought this might be an indication that they believed the Fed would not lower rates by 50 basis points. On a hunch, just before the Fed announcement, I took positions in a couple of inverse ETF's, only to see them rocket up a few minutes later. Was my logic sound, or was I just lucky?

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