Timing Market Turns - FOMC Cuts Discount Rate

0900 EDT

We will enter 75 % long Swing positions in Dow, NDX, SPX and RUT. Stops for today's closing should be in the daily spread on Wednesday, preferably the highs on Wednesday.

This trade may only last until closing as today's action depends on the return traders to some level of "belief in the markets". Initial opening stops for first 90 minutes is yesterday's 1512 EDT low.

Cover long Treasury positions.

WBB


0825 EDT

We will update before the opening after we observe the reaction's aftermath.

As we have thought, the 1998 pattern appears broken or significantly shortened.

The FOMC's action is unusual since it is the Discount Rate that was cut and may have more bearish implications for stocks over coming weeks. It is bullish for today and likely into Monday.

We will update by 0915 EDT.

WBB


TWO MESSAGES FROM THE FOMC THIS MORNING AT 0820 EDT

For immediate release

Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward.

In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably.

The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets.

Voting in favor of the policy announcement were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Richard W. Fisher; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Michael H. Moskow; Eric Rosengren; and Kevin M. Warsh.



For immediate release

To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility.

The Board approved a 50 basis point reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points.

The Board is also announcing a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially.

These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained.

In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York and San Francisco.