Another rally to record high… before a fall?

October 10th, 2007

Share |

Yesterday, the Dow rallied to yet another record high. Presumably, the reason was because the market, after looking at the previous Fed meeting’s minute, concluded that more rate cuts will be on the way.

As we said before in Drugged up stock market,

.. bad news is good news because a deteriorating economy will induce the Fed to flood the financial system with even more cheap money.

But don’t you notice that the flood of bad news has seemingly abated and the crisis in the credit market had been all but forgotten. If that is the case, wouldn’t such a lack of bad news induce the Fed to hold off more interest rate cuts? If the Fed take a pause in meddling with the interest rates after its next meeting (at the end of October), would that induce the stock market to fall again?

Hold your breath.