Today's action by the Federal Reserve may be the beginning of solving the problem of how to deal with large scale holders of CDO's (collateral debt obligations).
Regular readers know this issue is the last man standing in solving the sub-prime crisis. Basically, what the Federal Reserve is saying is "we will allow you to sell us your bad debt, and in exchange we will sell you treasury securities).
Treasury securities happen to be the safest investment on the planet, so I am sure there will be no shortage of takers' for this offer.
These actions should go a long way in thawing the credit freeze between banks while at the same time allowing banks to begin lending to consumers again.
In regards to the stock market, there is a possibility that yesterday was the end of the bear market. If that is the case, the action in the next two to three weeks will tell quite a bit.
After the euphoria of today wears off (probably after a few more days of upside action), the bears will attempt to regain the advantage. If at that time, the bears cannot move the market below yesterday's lows, it would be a compelling reason to re-enter the market.
If the bears are able to take out yesterday's lows, I stand by my assertion that we are near a significant low and would again look to the previously stated support levels.
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