Many investor and stock traders will always say that the great bull market began in 1982 when President Ronald Regan took office. While the S&P 500 Index did make a pivot low around that time the great bull market actually began much earlier than that. Believe it or not the great bull market began in 1974. At that time the Federal Reserve Bank had the Fed funds rate (overnight lending rate to the large major banks) around 12.92% in August of 1974. In September 1974 the Federal Reserve Bank began to slowly lower the Fed funds rate and that marked a significant low in the S&P 500 Index and the Dow Jones Industrial Average. The rally or boom cycle from the 1974 stock market low lasted about 13 years. The 1987 stock market crash was the top of that boom cycle.
After a sharp decline in 1987 the S&P 500 Index made new highs again in 1989 and traded sideways for a full year and a half before surging to new highs. In February 1991, the Fed funds rate was at 6.25% and was steadily being lowered by the Federal Reserve Bank. From the 1987 S&P 500 Index pivot low to the year 2000 the next boom cycle took place. It is important to note that this was another 13 years in time and this lead to the technology bubble. In total the entire boom cycle was 26 years from 1974 and was all caused by the lowering of the Fed funds rate by Federal Reserve Bank. Please note that in January 1999 the Fed funds rate was at 4.63% which was the lowest level since 1992. As we can clearly see every time the Fed funds rate has been lowered the action has caused a market boom. When the rate increases it causes a bust.
In 2003, the Federal Reserve Bank lowered the Fed funds rate down to 1.25%. This was the lowest level that the Fed funds rate had been since 1954. Again, the low interest rate gave birth to the housing and credit boom. This rally or boom cycle lasted just 5 years and as we know lead to the greatest recession that the country has ever seen since the Great Depression.
In December 2008, the Federal Reserve Bank lowered the Fed funds rate down to 0.00 – 0.25%. This helped the stock market to inflate higher and marked a significant cycle low in March 2009. Since that time the S&P 500 Index has bounced higher by 80 percent. However, the stock markets continue to struggle at this current level. Unemployment in the United States remains very high and has not really improved much since late 2008. The U.S. housing market continues to deteriorate with foreclosures rising nearly every month. Commodity prices have soared higher creating inflation for the Asian economies. How long will it be this time before this current boom cycle ends and the bust cycle begins? If recent history proves correct it wont be long. Each bust cycle is getting shorter and shorter in duration. The Fed funds rate is already as low as it can go. Other measures are being used by the Federal Reserve Bank such as the purchasing of U.S. Treasury bonds to keep the current inflation rally alive. We can only wonder how long boom cycle this can last?
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The Federal Reserve has made a name for itself by propping up the markets. They have pumped money into the system, artificially inflating asset prices. While this works in quiet volume scenarios where news remains neutral to positive, it does not work when external issues erupt. Lately, POMO by the Federal Reserve has been failing as Europe has started to crumble once again. Ireland is in the process of being bailed out, next comes Portugal and Spain then others. The mess is just getting uglier and uglier. As if the global markets did not have enough to worry about, North and South Korea broke out into fighting last night. The North attacked an island in the South Korea. This sent markets reeling again and investors ran for cover in U.S Dollars, in turn sends the markets lower. The SPDR S&P 500 ETF (NYSE:SPY) is trading at $118.21, -1.98 while the PowerShares DB US Dollar Index Bullish (NYSE:UUP) is trading at $23.01, +0.27. The SPY has just put in a bottoming tail which could mark the lows of the day. To gain more guidance, swing trades and education, join the Research Center.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
#1 Rated
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This book should help you understand and analyse the herdpsychology,more interestingly,your own psychology and behaviour.I always tell others,you need to learn how to trade the market against yourself,like playing chess against ones-self.If you not aware of such things,then it's the art of studing then conquering ones emotions (weakness),only you know your weaknesses,but if you don't think you have any,then you inself-denial(sick) and there's no cure for you,and that will reflect on your trading and most of your decisions in life.You have a choice just like Morpheus says to Neo,you can take the red-pill and I'll show you how deep the rabbit hole really goes.If you have an iphone,ipod or ipad you can download it from the ibook store free,or online as a free pdf.Goodluck and see you on the otherside!!!!!!My RegardsScrat
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Retail traders are notoriously wrong at picking market direction/tops and bottoms. Most retail traders very naturally seem to adopt a counter-trend stance and this offers very accurate signals for individuals looking to trade against this group. This daily report is designed to help traders focus their efforts on higher probability pairs.So what are the signals?Strong Short 66% Retail LongsShort 60% Retail LongsLong 60% Retail ShortsStrong Long 66% Retail ShortsWe are looking for 60%+ (Ideally for best opportunities 66%+) of retail traders to be trading either long or short a currency pair, we then look for opportunities to fade (trade against) this group. For example if 72.99% of traders are long the USD/CHF we look for opportunities to short that pair. The pairs that we feel offer the highest opportunity for success are described in the Strong Short and Strong Long areas.What’s New Today? Most currencies remain in the neutral zone. EURJPY edges its way into the short zone.Provided by Pivotfarm http://www.pivotfarm.com/Read more…
