Planet Wealth

The big news of Thursday happened after the market closed.  If you aren't yet aware, the Federal Reserve announced right after the market closed that they were raising the discount rate.  The discount rate is the rate the Federal Reserve charges its member banks for emergency loans.  The move immediately caused an already overbought (short term) US Dollar to spike to the upside.  The increase in the discount rate doesn't really affect the US Dollar directly, however may be viewed as a preview to higher interest rates.  As soon as the news was announced, the S&P futures dropped dramatically as the dollar rose.  As of this writing, the futures are still way down and the trade tomorrow should be very interesting to say the least.  As mentioned in the Platinum Trader's Club webniar on Wednesday night, we are at a major crossroads technically as to which direction the market will take over the next several weeks.  If the downward moves holds throughout the day tomorrow we may very well start the wave "c" of a zig-zag pattern lower.  In the past we talked about how equity markets hate rising interest rates.  However, here is a possible scenario for the bulls:  Banks have been making huge money by borrowing from the Fed at next to zero and then using those funds in the currency "carry trade" and making that money without the risk of lending funds to the public.  If the Fed has the idea of taking that free ride away from the banks, maybe it will entice them to lend more freely to the public and help get the economy healing again.  It will be quite interesting to see which view the market takes tomorrow.  None the less, you have to question the timing of the Fed's announcement......to create this kind of volatility the day before options expiration?  It certainly smells funny from here.