Below is the Market Commentary I wrote this morning at Investools.com.

"Fed Day" has come and gone and frankly, I am a little perplexed as to what I have just seen happen and what the Federal Reserve plans to do next.

In case you missed it, the Fed decided to lower the federal funds rate and the discount rate by a quarter percentage point down to 2%, and 2.25% respectively. If you haven't been paying attention, in 2008, the fed funds rate has plummeted 2.25%, while the discount rate has been slashed by a total of 2.5%. This is the largest reduction in both rates in such a short period of time.

The market fully expected this rate cut, but not by a unanimous vote. In fact, the concern was not whether or not we would see a rate cut, it was what the Fed would say in regards to inflation and the outlook on future rate cuts. As money managers have re-positioned their portfolios in anticipation, and as retail investors have taken profits in precaution, what did the Fed have to say?

Nothing.

In reality, the market was looking for a more "hawkish" stance by the Fed, which would have hopefully indicated an end of their easing campaign. The Fed did seem comfortable with where rates are, but they were very neutral in their statement. In fact, the FOMC (Federal Open Market Committee) actually adjust the statement to add emphasis on inflationary pressures, and that they were less worried about further weakening. This meant that they might leave rates unchanged at the next meeting, but this is not a certainty.

As a result of this event, the dollar weakened and gold prices rallied. The assumption that the Fed would take a hawkish stance has sent gold and commodity prices into the toilet leading up to this event, and has successfully dragged down most commodity related companies along with them. Today, they resumed prior trends.

While technology stocks usually do well leading up to these events, the NASDAQ took the worst beating of the averages, losing it's intra-day gains and finishing down on the day. Leading the declines were Semiconductors ($SOX), Financials (XLF) and all things consumer related ($CMR).

The $XAU led the advances today, staging over a 3% rally on the day, while Airlines ($XAL) came in a close second with a 2% increase on the day.

Earnings reports have looked very promising, but this quarter has had lots of ups and downs. Make sure you have checked the Earnings Calendar to see which stocks will be reporting and when it will take place.

Follow Up

In my last "Market Commentary" on Tuesday, I pointed out the opportunities that exist in gaining some international exposure to your portfolio, via the FXI and the EWZ. The FXI has increased by nearly 2%, but the big story was the move in the EWZ today; up 7.6%!

The energy stocks that were discussed, UNG, ATLS, EGN, EOG, APA, and DVN all moved higher today, despite a weakening in the broader market. If you did not analyze these stocks earlier in the week, a dip buying opportunity still exists here for those with a bullish posture.

Lastly, I want to pay homage to the implosions in GRMN (-11.93%) and WFR (-9.27%) from the "top pick" list from Tuesday. The only casualty was RIMM (-3.69%), which is only a temporary set back. The rest of the stocks from that list are doing what they are supposed to do.

Outlook

I am still a bull in this market, and here is what I am going to do about it:

I still love throwing my money at foreign countries, namely Brazil (EWZ) and China (FXI). If you want to take a look at some of the top performing individual equities, pull up charts on the symbols I have listed below.

Brazil

PBR, RIO, GGB, BBD, ITU, SID

China

LFC, CTRP, SOHU, BIDU

I am also looking to buy dips in the strongest performing stocks, such as GOOG, V, AAPL, etc. At the same time, I plan on taking an equal amount of bearish trades in weak stocks, such as WFR, GRMN, and WYNN.

I suggest that you be very selective in the trends you trade in, and aim for a good mix of bullish and bearish positions within your account. Keep a modest position size, and don't take the trade all at once. Start with a small number of contracts, and add to the position as it confirms your forecast.

Final Thought

If the market does pull back, I think it will be short lived. Therefore I am going to approach the market as if the rate cut hadn't occurred. This outcome bodes well for continuation in some of the strongest trends- energy, agriculture, and commodities. I have listed plenty of ideas to apply to the market until we meet again.

Homework

In closing, the most random thought occurred to me today as I sat down to write this article; I wonder how this interest rate slashing has impacted those that trade LEAPS?

LEAP option holders around the world are left scratching their heads as to why their positions have seen such a substantial decrease during these last 4 months. If you have ever listened to a presentation of mine, you'll know I am an advocate of option buying. However, if there is any one single strategy that I would remove from the wonderful world of options trading; it is LEAPS.

Your homework assignment is to study how interest rates can affect an option premium. This is measured by the option greek "rho." Rho has the least amount of impact on an option premium under normal circumstances. However, during times of economic stress where interest rates are drastically reduced, long dated option premiums are subject to significant price decreases. Take the opportunity to learn more about why this has been the worst era in the history of options trading to be the owner of a LEAP option, and get to know your "Rho."

Top Picks

Long: PCLN, V, CSIQ, NVDA- and "Rho"

Short: FMCN, AMLN, WYNN, GRMN, Airlines- and "The Fed"

Sincerely,

"The Option Addict"