Update 12/06/07

I’m doing a mid-week update to my brief because I made an IFT and the situation seems a little clearer.  It looks like a move above 1490 is likely.  I say that because the smart money rallied into the recent highs and the after markets are carrying that momentum.  The following is an excerpt from the beginning of the week. 

If the market is doubtful about the Fed’s course of action the news could produce the opposite effect because of the reaction by the Fed – what the Fed does is more important then anything else.  However, if a Fed action is very likely, and therefore predictable, then the market adjusts accordingly and the news simply is the news, good or bad.  This is something to keep in mind, because this pattern repeats itself in the lead up to every Fed meeting.

The market looks to be moving up as anticipation is building around the possibility of a Fed .50% rate cut.  This line of thinking is interesting because it takes a seemingly stable situation and adds a twist.  If the jobs report comes in at expectations, that could snuff out the expectation of the .50% rate cut.  My approach is not to get caught up in this kind of thinking – kind of like “I know that…you know that….I know….” This is a pointless feedback loop.  Stick to the basic assumption that a fed cut is very likely and the market will respond positively.  As Tom mentioned in this morning’s comments, there is the after meeting whip and if we move to a level of strong resistance (i.e. 1530) we could see significant profit taking – I know I will, but get into that on Sunday once we see how this week plays out.

I was leaning towards expecting a weak jobs report, but the employment data that came out today suggests the job situation is better then I anticipated.  I am expecting the jobs report to meet expectations.  The unemployment data comes out tomorrow and that should give us another hint at what Friday has to offer.

Griffin