If this was a major conflict, futures would be down limited. It a few traders trying to get ahead of the news. First, we are air striking insurgents, not a country's army. It will mostly be air cover for humanitarian aid drops. Second, the Fed will not allow such a deep sell off in a market that they have supported with worst news in the past. Third, Obama had probably dipped off the Fed knowing the knee jerk reaction so that they are ready in the morning to buy up any weakness.
I am going to predict that once the reality of what "airstrikes" actually means, the futures pare their losses significantly and between the short covering and the fed buying we end up tomorrow.
Economically it is a non-event. It does not stop oil from flowing, it doesn't put boots on the ground, it doesn't stop trade. The market rose significantly while we were bombing Afghanistan and we had actual troops on the ground. This also has nothing to do with the Russian Ukraine conflict or the Israel Palestine conflict. The other thing to keep in mind is that we partnered with ISIS against Syria and that is why we will not fully engage. This is just flexing by the administration saying it is keeping its options open. This will not be an event to cause a huge market sell off once the Fed and the professionals start trading in the morning.
Does the Fed actually support the market by buying stock futures or option contracts? With essentially an unlimited amount of money to play with, the Fed could easily prevent any possible selloff while also making a substantial amount of money during the process.
I think they can do more than that. With perfect information of the market and the unlimited printing press, they need to try very hard not to distort the market and make good money during the process. Only hyperinflation and the political pressure coming with it will stop the Fed madness, but it is a long way to go.
The Fed buys future contracts causing a discount to the underlying stocks. Then the arbitragers come in and move the underlying up on low volume to take the profit between the cash and the futures. They have been doing this for the last 18 months and it is very effective. When you have an unlimited balance sheet and the ability to electronically create currency there is no way to fight the Fed.
I don't want to do this but I cannot help: The bears will wake up confronting a green future tomorrow morning. They still have not figured out the difference between today and 1987: back then the Fed cannot print unlimited amount of money and buy up the market; now they can. There is only one thing that can kill the bull S market, and that is hyper-inflation. Until then, any downward move is limited. Besides, how come is it so negative that we bomb a bunch of folks in the mountain? The US has been doing that every day.
Nice rally! Any Fed intervention today?
I think the Fed would be happy if the market just trades in a channel for the rest of this year, with a lot of volatility of course. Maybe with a lot of days like today, they could make enough money to pay off the national debt.
You sir are wrong... Fed was able to do that in the past... inflation is creeping into the picture... if they were nuts enough to go crazy and try to print there way out of a natural correction it will backfire in their faces... there is already dissent among the ranks of Fed chiefs. As well as americans that are starting to wake up and smell the coffee and realize all this printing hasn't done a damn thing for the middle class except make them poorer.