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

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Strengthen your portfolio in good times and bad.

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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

Economics

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.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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