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Two Ways To Play: Will Interest Rates Get Cut To Size?


Strengthen your portfolio in good times and bad.


Rate-Cut Decision Imminent!

The Federal Reserve will announce its decision on interest rates at 2:15 EST. According to Bloomberg, economists are expecting it to lower the benchmark rate to 1%, or possibly to a level not seen since Dwight Eisenhower was president. Some believe Chairman Bernanke could reduce borrowing costs to 0 by June if the credit crunch intensifies.

In the past 13 months, the Fed has cut the benchmark rate from 5.25% and created 6 lending programs to channel over a trillion dollars into the banking system.

For more context, see yesterday's Five Things You Need To Know: Fed Faces the Limits of Confidence by Professor Depew.

From the Bull Pen: In such a difficult environment, bulls can use a tactical approach. Those seeking an upside trade can look to Chipotle Mexican Grill (CMG). Is the stock headed for its 50 DMA ($58)? Consider setting sell stops near $49-50.

From the Bear Cave: Regardless of the decision, what matters is interest rates in the real economy. Those bearish can consider the Russell 2000 ETF (IWM) sitting right below $50 resistance. Buy stops can be set above that level.

Quick Check Around the World

Asian trading closed with the Hang Seng 0.84%, Nikkei 7.74%, Sensex 0.40%, Taiwan 0.15% and Shanghai -2.94%.

Glancing towards Europe, we see the CAC 7.04%, DAX -0.59%, FTSE 5.35%

As of 8:10 a.m. EST, S&P Futures are trading +11 to 950, and Nasdaq futures are +10 to 1317.

A Look At Commodities

Crude oil is trading +3.10 to 65.83. Gold is +11.50to 750.80. Silver is +0.460 to 9.250 and copper is +5.55 to 184.15.

The dollar index is -1.265 to 85.749.

On the Radar


07:00 MBA Mortgage Applications
08:30 Durable Goods
08:30 Durables ex Transpiration
02:15 FOMC Rate Decision

Click here for the full trading radar.

We're on the hump! Good luck!

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No positions in stocks mentioned.

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