With about 24 hours to go until the Fed announces what comes next, I figured I should put myself on record with a prediction. Given that it will be based on nothing more than tarot card readings, the above title is entirely appropriate.
Operation Twist (the sale of shorter-term securities to buy longer-term securities) has gained traction as the most likely outcome right now. I think that means it has probably been priced in already. And if you look at a daily of the S&P 500 for the past two months, you could make the argument that the discussion of Operation Twist simply created a consolidation pattern (following the market crash that started on July 25th) before the next leg down. It certainly looks like a double top is forming, at a minimum.
Thus, I think the Fed will need to be bold, and probably will be bold, since the market has become a key metric by which it takes the economy's temperature (to borrow from David Rosenberg). And (to borrow from Bill Fleckenstein), whether I'm right or not, the Fed probably will be forced into something meaningful anyway, because the market will tank if there isn't a new program of easy money rolled out tomorrow.
