Fed Cut

The much anticipated fed cut had finally arrived. Since it was anticipated, the rally party was much shorter than expected. Within 12 hours subsequent to the announcement, Asian markets experienced first signs of weakness, with the STI closing negative. Dow was pretty much in the negative zone that night, closing negative 322 points amidst Fed pumping in 41 billion for liquidity.

STI Outlook

In the short term (few days to end of week) there might be a few rebounds. The STI can still swing either ways. My opinion of it is extremely bearish, sitting now at the support level of 3650. It should test this level a few times before breaking downwards towards the next strong support at 3550.

Cooking a frog

Ever learnt how to cook a frog? Throwing it into boiling water will cause it to immediately jump out, leaving it much alive. The right method is to leave first in lukewarm water and slowly increase the tempreture till the water boils. By the time the frog realizes what hot soup it is in, it is way too late to jump out.

So what are you trying to say?

Operators need liquidity to cash out and they need to do it slowly to maintain that liquidity. In so doing, prices will go down bit by bit (or more accurately bid by bid). Don’t forget to check that the lukewarm water you have been wading in is not boiling. Just keep an eye on your counters, especially the speculative ones. Remember to watch your losses and let your profits run.