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Minyan Mailbag: Yesterday's Post-Fed Rally

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Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next column with that very intent.

Prof. Succo,

So the Fed comes out with its standard, "everything is great, please don't panic sell the dollar and treasuries" statement and the market rallies like crazy on the non-news. Seems to me that I've seen this many times before, then watched the market fall back down with the longer term trend the next day, as it is doing today.

So my questions for you are:
What are the mechanics behind a rally like yesterday's?
Big buying in the futures first?
Big name stocks leading the market up?
What first steps does the big player take to signal the official reading of the Fed's message?

Minyan Rodg

Rodg,

The buying was done in futures first, in very big size. The ticks reached +1500 very quickly, the highest level I have seen in over a year.

But more importantly, the buying was done in a very "sloppy" fashion: someone not sensitive to price. This could be a large short controlling risk, but if that is the case, that risk manager needs to learn a few things.
The first thing any experienced trader knows is to not panic. It is a high statistical probability that if a price is missed, there will be another chance to execute. Panic is an emotion and emotion has no place in trading. When a trader alters a view, adjust appropriately but do it intelligently.

It seemed to me that large stocks were dragged along kicking and screaming. IBM (IBM), which seems to be in a world recently visited by other big cap names like Wal-Mart (WMT) and Microsoft (MSFT), ended up down on the day.

There seems to be no real "leadership" in the market. Rallies seem to be merely a function of excess liquidity squirting around. Telecoms are in good shape, but that is a function more of desperation as each company is trying to merge with another to cut costs.

Official readings are the territory of the tele-tubbies, not mine!

Regards,
Prof. Succo

position in ibm, wmt

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