Daily Futures Commentary February 19, 2010

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Friday, February 19, 2010

U.S. stock indices sold off after Thursday’s hike in the Fed discount rate. The immediate reaction by traders was to sell because many traders thought this move served as a sign that
the Fed would begin tightening its monetary policy. The Fed, however, is emphasizing that this move is not a deviation from its policy statement that interest rates will remain low for an “extended
period”. This news is helping to stabilize the stock indices, leading to a shortcovering rally overnight.

The March E-mini S&P 500 is still negative, but trading well off of its low. The current shortcovering rally indicates that yesterday’s late session break may have been overdone.
Don’t be surprised if this market tries to regain the psychological barrier at 1100.00.

March Treasury Bonds and Notes sold off sharply after the Fed hiked the discount rate, but in a case of sell the rumor, buy the fact, they both turned positive overnight. Oversold
conditions are most likely contributing to the rally. In addition, bond traders are buying into the Fed’s comments that the discount …

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