As I pointed out a few months ago here, the Federal Reserve under Ben Bernanke was fighting a non-existent inflation and keeping the financial brakes on the economy.

Bernanke and the Fed have finally awakened to the problem after their long nap and the investors of the world, evidenced by the stock market rebound in the USA on Friday and in the rest of the world beginning in the past few hours overnight.

Having prophesied the impending correction, I have recommended on this website that investors take their profits. With cash in hand, one could have happily watched the market gyrations, more down than up, in recent weeks.

Then, at the appropriate time, which was last Thursday in my opinion, one could have re-enteed the equity market with the expectation of more profits to come. The overall economic news has been good all along.

Even though computers are not subject to emotion and panic, theoretically, one notes that programmed trading by large mutual funds, hedge funds, and other investors exhibit the snowballing effects that one would attribute to panic in human-directed investing. One program is triggered, sells off stock, and this triggers another brokerage program which sells, which triggers others, and thus the marked swings we have seen in recent weeks. Then the computer programs' selloffs spook individual small investors and they sell in a panic too.

Unless an investor is 18 years old with 40-50 years before retirement, the days of buy and hold are over. This especially applies to those near retirement now. The rapid market fluctuations, panic selling, and a shortened timeline for recovery make market timing more important than ever before.

Note the following: If the market drops and you are retired and withdrawing money, you are depleting your investment principal and thus will have reduced potential for growth when the market recovers.

Note also Some say that the market drops 10% and then rises 10% it is a wash, you are not worse off. But this is incorrect. Let's say you have a 100,000 dollars invested. A market drop of 10% means you are down to 90,000 dollars. But then the market rises 10%. 10% of 90,000 is 9,000 dollars, so you end up with 99,000 dollars, not your original 100,000. Thus a roller-coaster ride in the stock market which ends up at its original starting point will nonetheless leave you poorer than when you climbed into the coaster car.

The Fed's actions in lowering the discount rate will inject some needed liquidity into the economy. There will still be some market fluctuations, but the general trend for the next 3-6 months will be up.