Fed adds fuel to the fire, thinking it is pouring water

The Fed decided that financial markets are not enough volatile and decisively added fuel to the fire. This refers to another emergency rate cut. As a result, rate reached 0% (range 0% -0.25%). Plus, the bond purchases program is expanding by $ 700 billion. According to the Fed's idea, it was saving water, which the Central Bank flooded in the financial markets. But in fact it turned out to be oil that the Fed poured into the flames, which made it flare up even more.

In general, such a reaction of the stock market to unprecedented steps by the Fed is an extremely bad sign. The markets fell into insanity. And if before that (the beginning of the 2020) it was about crazy greed, now it is crazy and uncontrollable fear. The panic continues, as do stock market sales. Once again, we recall our recommendation to sell, which we voiced when NASDAQ was above 9500. Despite the fact that yesterday this index fell below 7000, the potential for its reduction has not yet been exhausted. Just in case, we note that even thinking now about purchases in the US stock market is a premature and risky occupation.

Our regular readers will remember that we noted the buyback by companies of their own shares as one of the key drivers of US stock market growth. Now the current problems of the US stock market are compounded by the fact that corporations are massively refusing to buy back stocks. This is very typical example if market irrationality: to buy expensive and not to buy cheap.

So, so far, everything is extremely bad. We are still at the epicenter of the crisis (at best) or are approaching it (at worst). Analysts continue to revise forecasts for the radically worse side. For example, Goldman Sachs now believes that US GDP in the second quarter will fall by 5% (!) with zero growth in the first quarter.

Oil yesterday resumed its decline, which, in general, is not surprising. What else should it do in such conditions? We are waiting for oil at about $ 25 (WTI brand) to add to medium-term purchases (we start them at $30). But at the same time, we are looking for opportunities for sales with small stops within the day. Until Russia and Saudi Arabia are in market war, oil growth will be limited (unless, of course, it will).

Otherwise, the list of our preferences is as follows: buying gold, selling EURGBP and EURUSD, as well as active oscillatory trading on most assets within the day.