"Ben Bernanke threw a rate cut party and all the bulls attended," says Mark Leibovit, who was ranked the top trader among financial newsletters in 2006 by Timer Digest.
In his VRTrader service, he notes, "The Sept 4th highs were taken out, confirming that a bona fide rally is once again under way. Breadth was very strong. Up volume lead down volume by an incredible 25 to 1. This is a market record!"
He continues, "Traders tend to sell into the news, but technically, we've now theoretically triggered the bullish 'reverse head-and-shoulders' pattern."
Meanwhile, he observes, the August PPI dropped 1.4%, while the core rate was in line with expectations at +0.2%. The advisor jests, "Of course we all know that record high crude oil, heating oil, and soaring food prices are just a mirage. Everything is fine... really. Really?"
Leibovit notes, "Energy and food prices were two inflationary items that were supposed to keep the Fed to the lower end of rate cut expectations (a 25 bps rate cut). That was not to be, as they made it clear that the larger risks were in economic slowdown."
On a cautious note, he suggests, "The Fed must really see potential economic weakness that they are trying to head off here, otherwise cutting by 50 bps with $81+ oil is sheer madness, in our opinion."
He suggests, "Even the Fed knows that inflation is alive, well, and flourishing, so today's cut is not the end of the story, but the beginning of perhaps the most crucial tightrope walk in the history of the Federal Reserve."
As to his near-term outlook, the trading advisor says, "The temptation here on my part is to 'ring the register'. But, if I sell, where do we repurchase, especially if the market does not accomodate us and decline? My cyclical work said to stay long and, frankly, it still does."
He concludes, "The perception of a negative September and negative October, the fear of what the FOMC may or may not do and a whole host of other concerns are part of a 'bear trap'. We believe we are headed to new highs overall, so any pullbacks should be viewed as buying opportunities."
Each day, Steven Halpern's TheStockAdvisors.com features the latest stock picks and investment ideas from the nation's leading financial newsletter advisors.
For a quick-read on the U.S. economy, check the price of gasoline
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