It is an old saw on Wall Street that shorting stocks while the Federal Reserve lowers interest rates is likely to cost you money. Don't bet against the Fed. And historically, the axiom proves true. You can play with the statistics, starting and stopping the trade when you want, extending or shortening the time period, but by an obvious margin--a clear majority of the time--stocks push higher when rates come down.
So this chart ...what do you think? Is this recent rally a Dead Cat Bounce, the result of traders who believe in this axiom, grasping at straws before the next big leg down? I can see that in this chart, can't you? There have been several of these bounce-backs on the way toward the abyss. Or, has the market bottomed? Have the Fed's actions prevented a recession and a housing disaster? Sent a shock wave of stimulus to nip our economic problems before they snowball?
The future is unknown, my fellow investors. But I say,
Don' Bet Against The Fed
(Thanks to ETrade for charting this S&P 500 Index fund, symbol: SPY. You can buy and sell this basket of America's 500 biggest and best companies just like a stock. A monthly purchase of SPY shares makes an easy and diversified retirement vehicle. AC)