As Of: March 7, 2001
It should not matter whether an interest rate cut comes now or in a few weeks except for the fact that the U.S. stock markets are in a down trend. Anyone who wants to short the market to take advantage of of the down trend is forced to cover or risk disaster if the market rallies on the news of an interest rate cut. Thus, we have to live with the risk of added volatility until the announcement is actually made.
The short term issue of a rate cut aside, the NASDAQ is oversold and trying to find a bottom. It is not too early to start building positions in a small way, but only if you are trying to dollar cost average through the bottom. If a stock doubles in five years, your return is better than 14% per year. If you look at some of the beaten down stocks and ask yourself if they are likely to be twice as high five years from now, starting to build some positions makes sense. But you also need to descriminate against the stocks of companies that may not be in business two years or five years in the future. (Note: Patience is required. There could be more down, and certainly a lot of basing before there is much of a move up.)
While the S&P 500 and Dow Jones Index could rally in the short run, they have more downside potential. The Nomothetic Theorem trading model is neutral at this time, but displaying a down trend.
Look for a rally and expect people to sell into it.
How things change: One year ago analysts raised their price target for Priceline.com to $150.00. Today the shares are trading at $2.50 having hit a low of $1.00.