By Nicholas Santiago on October 26th, 2010 3:43pm Eastern Time
Next week is going to be one of the most highly anticipated Federal Reserve Bank meetings that investors have waited for since the 2008 credit crisis. As we all know by now the stock market began to climb the wall of worry in late August 2010 when Federal Reserve Bank Chairman Ben Bernanke announced quantitative easing part two(QE-2). This is another way of saying that the Federal Reserve will create more money and flood the system with it. Therefore, the stock market always jumps the gun and rallied on that anticipated news and has been trading sharply higher ever since. At this time many investors and money managers are expecting the Federal Reserve Bank to print between $1 – 3 trillion. However, nearly everyday a Federal Reserve Bank President comes on television and says something different. Therefore, the stock market seems handcuffed to the statements and actions from the Federal Reserve Bank and it's operators.
Does it really matter what the central does? Since the 2007-2008 credit crisis the central bank of the United States has done everything in it's power to keep the market trading higher. They have bought mortgage backed securities, U.S. Treasuries, and printed so much money that gold has traded to new all time highs and has become the trade of choice by most investors. These guys have diluted the U.S. Dollar Index beyond belief by their actions. Just look at where the U.S. Dollar Index traded in 2001 and 2002. Believe it or not the U.S. Dollar Index was trading around $120.00 at that time. Today the U.S. Dollar Index is trading around $77.00. That is about a 35.0 percent decline in the U.S. Dollar Index for those of you that are wondering. Is artificial inflation the only trick in the book?
Please understand the United States can withstand a weak dollar for a while. In 2008, the U.S. Dollar Index did trade as low as $70.69. However, that was not a very good time for the global markets as it was the start of the credit crisis that took place. This time around the powerful Federal Reserve Bank is trying to fight off deflation. Personally, I'm not sure if this is how you do it. By lowering the strength of the currency this is a sure way to create another commodity or asset bubble. Just look at the bubble that former Federal Reserve Bank Chairman Alan Greenspan caused between 2000 and 2007. The world went from a tech wreck to the largest credit bubble since the Great Depression.
Right now the stock market has had it's rally from the so called QE-2 announcement from Ben Bernanke. It is now time to put up or shut up for the Fed. Go big or go home. The credibility of the Federal Reserve Bank is dwindling by the minute. This is starting to look a lot like the early 1970's when investors just lost faith in the central bank. Popular television shows such as the Dylan Ratigan Show, and Judge Napolitano's Freedom Watch are getting mainstream support in bashing the Fed. The tea party is another movement that seems to be against the central bank of the United States. The suspense is building for next week's FOMC meeting. We shall see very soon how this stock market reacts.
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OIL FUTURES: Stronger Dollar Halts Crude's GainsBy Dan StrumpfOf DOW JONES NEWSWIRESNEW YORK (Dow Jones)--Oil futures settled higher Tuesday, but a stronger dollar kept a lid on prices despite some upbeat economic data.Light, sweet crude for December delivery settled up 3 cents at $82.55 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange recently traded down 1 cent at $83.53 a barrel.Several economic reports released Tuesday hinted at a strengthening U.S. economy, which would raise future crude demand. The Conference Board reported October consumer confidence rose to 50.2 this month, from last month's revised 48.6, edging past the average estimate from economists surveyed by Dow Jones Newswires.Meanwhile, a report from Redbook Research said national chain-store sales rose 0.3% in the first three weeks of October from September, though the figure was slightly lower than the expected gain of 0.4%. The S&P Case-Shiller home price index indicated yearly gains in home prices slowed in 17 of the top 20 markets.Early oil price gains were quickly withdrawn as the dollar rebounded from lows hit against other major currencies. The prospect of monetary stimulus from the U.S. Federal Reserve had caused the dollar to hit a 15-year low against the yen Monday, making oil priced in the greenback cheaper to buy using other currencies. But the possibility that the Fed's actions won't live up to market expectations, or that other central banks will weaken their currencies, sparked a rebound in the dollar. The ICE Dollar Index, which tracks the dollar against a basket of currencies, was at 77.724 when crude futures settled, up from 77.038 earlier.Traders are looking ahead to data due Wednesday on U.S. oil inventories. Analysts expect the U.S. Department of Energy data to show a 700,000-barrel rise in crude stockpiles for the week ended Oct. 22, according to a survey by Dow Jones Newswires. Gasoline inventories are expected to fall 200,000 barrels. Stocks of distillates, including heating oil and diesel, are projected to fall by 1 million barrels.Last week's report showed a 2 million-barrel drop in commercial crude and fuel stocks."Everybody's waiting on the numbers tomorrow," said Mark Waggoner of Excel Futures.Labor unrest in France continued Tuesday, disrupting supplies for European refineries. Petroplus Holdings AG said it is shutting down its 68,000-barrel-a-day Cressier refinery in Switzerland due to a strike at the Fos-Lavera oil port in France. That strike entered its 30th day Tuesday.Workers at eight out of 12 French refineries are also on strike.Front-month November reformulated gasoline blendstock, or RBOB, rose 1.67 cents to $2.0940 a gallon. November heating oil gave up 0.5 cents to $2.25 a gallon.More information on settlements and highs and lows for futures on Nymex and ICE platforms can be found by searching for the following headlines:Nymex Light Crude Oil CloseNymex Harbor RBOB Gasoline CloseNymex Heating Oil CloseICE Brent Crude Oil CloseICE Gas Oil Close-By Dan Strumpf, Dow Jones Newswires; 212-416-2818; dan.strumpf@dowjones.comClick here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=xbCQg2y5gV%2BAkEffIDJEqQ%3D%3D. You can use this link on the day this article is published and the following day.(END) Dow Jones NewswiresOctober 26, 2010 15:09 ET (19:09 GMT)
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By Gareth Soloway on October 26th, 2010 11:45am Eastern Time
The markets are flat on the day after a solid gap lower. Today is another POMO (Permanent Open Market Operation) day by the Federal Reserve. This information can be found on the New York Federal Reserve website and is known for helping the markets rally off their lows. The Federal Reserve infuses money into the system to be used to help prop up equities. The SPDR S&P 500 ETF (NYSE:SPY) opened at $118.10, -$0.60. After initially selling off lower, the Dollar began to drop, saving the markets and lifting them back towards the flat line. In addition, International Business Machines Corp. (NYSE:IBM) announced a $10 billion buyback. With IBM being a key component of the Dow Jones Industrial Average, the markets surged on this news. After POMO, the Dollar dropping off the highs of the day and the IBM news, the SPY is trading at SPDR S&P 500 ETF (NYSE:SPY).
Remember, the markets have a very low probability of selling off prior to the elections and the Federal Reserve meeting next week. The market will most likely be held up into the elections and the markets are also waiting to hear how much QE2 (quantitative easing round two) the Federal Reserve will do. To gain more insight, guidance, analysis, swing trades and education, join the Research Center.
Gareth Soloway
Chief Market Strategist
www.InTheMoneyStocks.com
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By Nicholas Santiago on October 26th, 2010 10:33am Eastern Time
As long as the U.S. Dollar Index declines after the opening bell at the New York Stock Exchange the stock market will trade higher. We call this the 'Night of the Living Dead' trade. Every time the stock market gets knocked down or declines it just comes right back to life and trades higher as the U.S. Dollar Index declines intra-day.
In February, March, and April of this year the major market indexes were able to actually trade higher with the U.S. Dollar Index. However, throughout that time period the U.S. Dollar Index always declined after the opening bell. That is precisely what is taking place today. Remember what has happened in the past will happen again. When the U.S. Dollar Index declines the stock market inflates and trades higher.
By Kristina Cooke
ITHACA, New York (Reuters) - The Federal Reserve cannot "wave a magic wand" to fix the economy overnight, but it can provide "essential" support, a top Fed policymaker said on Monday.
http://www.cnbc.com/id/39841330Read more…
