Market Analysis of monday and Prediction

*****World market***

The Federal Reserve is going to cut the target on a key short-term interest rate on September 18. There is no mystery about that.

According to futures on the Chicago Board of Trade, the market is pricing in a 100 percent chance of a cut to the federal funds rate, an overnight bank lending rate that heavily impacts how much interest consumers pay on their credit card debt, home equity lines of credit and car loans.

I would say there has been a time correction in the market, so compared to last time if you just roll forward earnings then obviously market .The fact that the Fed already cut its discount rate, which is what banks pay to borrow money from the central bank, in a surprise move on August 17, coupled with remarks from Fed members in the past few weeks about how closely they are monitoring the mortgage meltdown that is roiling the markets, makes it a virtual lock that Ben Bernanke and Co. will lower the fed funds rate on Tuesday.s cheaper than what it was when it touched last time highs.

Having said that challenges in the market has also risen. One, external environment has worsened. Secondly, the political situation on the domestic front is also looking not too great. Thirdly, the recent data from economy perspective suggest some amount of mid-term slow down which was reflected to some part in Q1 earnings and is being reflected to some extent on IIP numbers that have recently come out.

Still, there is a fair amount of intrigue surrounding the September 18 meeting. Specifically, investors are unsure about how much the Fed will lower interest rates.

The Fed cut the discount rate by a half of a percentage point, from 6.25 percent to 5.75 percent, on August 17, leading many market observers to speculate that the Fed would also lower the fed funds rate by a half of a percentage point on September 18.

To that end, as of September 14, investors were factoring in a 58 percent chance that the Fed will cut the fed funds rate by 50 basis points, or half of a percentage point, to 4.75 percent, on Tuesday.

But hopes appear to be diminishing somewhat for a big rate cut. Investors had been pricing in a 74 percent chance of a 50 basis point rate cut on September 12.

Still, what will happen if the central bank only lowers interest rates by a quarter of a percentage point? Fed watchers said it all depends on what the Fed says in its statement.

John Norris, director of wealth management at Oakworth Capital Bank, a private bank in Birmingham, Ala., said the market would probably not be too happy with just a 25 basis point cut at first. But he thinks that in some ways, a smaller rate cut might be more reassuring.
"Obviously everyone wants a 50 basis point cut. If it's only a quarter of a point the market will be upset," Norris said. "But if the Fed cuts by 25 basis points and the language in the statement is strong enough to indicate that this is the first of many cuts to come, cooler heads will prevail. Investors would like that as much, if not more, than a half-point cut with language that indicates this is just a one-off thing to placate the markets."

Scott Martin, managing director with Astor Asset Management, a Chicago-based investment firm with $200 million in assets under management, agreed that a half of a point cut might soothe the market at first...but not for long.

"If the Fed cuts by 50 basis points, you have to worry about the health of the economy. If the Fed can just say that they are going to keep an eye on the subprime market and signal that they may cut two more times by the end of the year, that might be the best case scenario," Martin said.

Vincent Boberski, portfolio strategist with FTN Financial in Memphis, also said that a half-point cut might get some cheers at first but it could wind up spooking the markets once investors realize the reason behind it.
"If the Fed were to cut rates by a half point, it might backfire since it could potentially give the market the impression that the economy is much weaker than investors thought," Boberski said.
Despite fears that the subprime mortgage market implosion could send the economy into a recession, fears stoked by the surprise decline in jobs during the month of August and a smaller-than-expected increase in retail sales, Norris points to other economic evidence that might prevent the Fed from cutting rates aggressively.
For one, oil prices hit $80 a barrel for the first time ever on Wednesday. That, as well as rising prices for other commodities, could keep the Fed from lowering rates by too much since it wants to keep inflation in check.
Given these challenges, I think market can rise but fundamentally given these three factors I think sustaining that would be difficult.

I think we will again retest August Low and then start with full fledge,if nothing in sky.

***Market Tommorow Have a Support at 4490 and 4454 .Nifty Have a Resistance level at 4542 and 4588.Below 4400 nifty will in dangerous mode.

Moday is a Sensitive day for market , Lot of chance is for deep correction.Do some shorts on monday.