Often times we talk about game changers or better yet, a change in the status-quo. Today we got such an event. They only happen a few times (if that) each year, and when they do, they can turn the tide of the market in an instant. Whether today will prove to be such, only time will tell, but it has the potential to curb the selling that we have been witnessing in recent weeks.
Take a look at two previous game-changers this year 1) the collapse of Bear Stearns and the subsequent bailout of the company by JP Morgan (JPM), and 2) The Fed raising interest rates dramatically within a one-week period; both of these examples stopped the massive selling that had been taking place for weeks prior.
Now consider what we got out of the Fed today with the bailouts of Fannie Mae (FNM) and Feddie Mac (FRE), and tell me whether you think that has the potential to have the same impact on the market as the previous two examples that occurred earlier this year. I tend to believe it will, whether we will see it immediately or not.
Here’s the Nasdaq and S&P charts…
