Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19
Gold Price Confirmation of the Warning - 18th Mar 19
Split Stock Market Warning - 18th Mar 19
Stock Market Trend Analysis 2019 - Video - 18th Mar 19
Best Precious Metals Investment and Trades for 2019 - 18th Mar 19
Hurdles for Gold Stocks - 18th Mar 19
Pento: Coming QE & Low Rates Will Be ‘Rocket Fuel for Gold’ - 18th Mar 19
"This is for Tommy Robinson" Shouts Knife Wielding White Supremacist Terrorist in London - 18th Mar 19
This Is How You Create the Biggest Credit Bubble in History - 17th Mar 19
Crude Oil Bulls - For Whom the Bell Tolls - 17th Mar 19
Gold Mining Stocks Fundamentals - 17th Mar 19
Why Buy a Land Rover - Range Rover vs Huge Tree Branch Falling on its Roof - 17th Mar 19
UKIP Urged to Change Name to BNP 2.0 So BrExit Party Can Fight a 2nd EU Referendum - 17th Mar 19
Tommy Robinson Looks Set to Become New UKIP Leader - 16th Mar 19
Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - 16th Mar 19
Towards the End of a Stocks Bull Market, Short term Timing Becomes Difficult - 16th Mar 19
UKIP Brexit Facebook Groups Reveling in the New Zealand Terror Attacks Blaming Muslim Victims - 16th Mar 19
Gold – US Dollar vs US Dollar Index - 16th Mar 19
Islamophobic Hate Preachers Tommy Robinson and Katie Hopkins have Killed UKIP and Brexit - 16th Mar 19
Countdown to The Precious Metals Gold and Silver Breakout Rally - 15th Mar 19
Shale Oil Splutters: Brent on Track for $70 Target $100 in 2020 - 15th Mar 19
Setting up a Business Just Got Easier - 15th Mar 19
Stock Market Elliott Wave Analysis Trend Forercast - Video - 15th Mar 19
Gold Warning - Here Are the Stunning Implications of Plunging Gold Price - Part 1 - 15th Mar 19
UK Weather SHOCK - Trees Dropping Branches onto Cars in Stormy Winds - Sheffield - 15th Mar 19
Best Time to Trade Forex - 15th Mar 19
Why the Green New Deal Will Send Uranium Price Through the Roof - 14th Mar 19
S&P 500's New Medium-Term High, but Will Stock Market Uptrend Continue? - 14th Mar 19
US Conservatism - 14th Mar 19
Gold in the Age of High-speed Electronic Trading - 14th Mar 19
Britain's Demographic Time Bomb Has Gone Off! - 14th Mar 19
Why Walmart Will Crush Amazon - 14th Mar 19
2019 Economic Predictions - 14th Mar 19
Tax Avoidance Bills Sent to Thousands of Workers - 14th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

Stock and Bond Market Shock Waves!

Stock-Markets / Stock Markets 2013 Feb 22, 2013 - 03:36 PM GMT

By: Robert_M_Williams

Stock-Markets

Yesterday around 2 pm EST a small tremor shook Wall Street. Minutes of the Federal Reserve’s January meeting released reveal that many Fed officials are worried about the costs and risks arising from the $85 billion–per–month asset-purchase program. And they all seem to have their own ideas on how to proceed. Several Fed officials said the central bank should be prepared to vary the pace of the asset-purchase plan depending on the outlook or how the program was working. One wanted to vary it on a meeting-by-meeting basis. One new idea backed by a “number” of Fed officials would have the central bank promising markets that it will take its time when selling its massive holdings of Treasuries and mortgage-backed securities.


This was only one possible scenario discussed as the minutes show a committee that is far less unified than at any other time in the past few years. The Fed said a review of the program had been set for March. Fed Chairman Ben Bernanke will hold a press conference at the end of the two-day meeting on March 20. Without the Fed’s unconventional program, the 10-year Treasury would yield 3% or more, according to research published by Goldman Sachs. A number of Fed officials said the central bank may have to taper off or end the purchases before reaching the stated goal of a substantial improvement in the labor-market outlook. On the other hand, several Fed officials warned that ending the asset purchases too soon would damage the economy. They stressed that it was important to communicate that the Fed would hold to an ultra-easy policy stance as long as warranted by the weak economy.

One Fed official said that the central bank could adjust the size of the asset-purchase program every meeting. Some officials said they were worried about the effects of more asset purchases on the functioning of particular financial markets. As it stands right now the bond, dollar and stock market are all greatly affected, some would say corrupted, by the Fed interference. Some far all of this is just talk, and it might be designed to slow the markets down a bit. Stocks are close to all-time highs so this may be nothing more than “jawboning” in an effort to slow the car down a bit. There has been a lot of commentary directed toward the Fed pressuring it to come out with a plan to move out of QE.

 

Whenever you hear comments like this the first thing you have to do is ask yourself if it’s probable. Right now the Fed is acting as a buyer of last resort for a government that is running trillion dollar plus deficits. This way it can   

keep the government funded, prevent defaults, and keep rates lower. Even with all the QE the interest rate has still been climbing over the last seven months!

Here’s the trillion dollar question: if the Fed stops QE here, who will buy the trillions of dollars of new debt issued by a fiscally irresponsible administration? Who will pay off the bondholders when the old debt comes due? The answer is that no one will be standing in that line so that means the government will have to become fiscally responsible almost overnight. For those of you pay attention to what goes on in Washington, you know that almost no one is willing to sit down and have an intelligent discussion regarding debt, and there is absolutely no political will to resolve the issue. So an intelligent man will look at all of this and come to the conclusion that we’ll see business continue as usual.

That means that the US Dollar Index, now at the key resistance level of 81.45, is something that should be sold rather than bought. In spite of the recent run-up the trend continues to be headed lower. Without a doubt we’ve seen efforts by Japan, Europe, China and Switzerland designed to cheapen their currency with respect to the US dollar, a sort of competitive printing war if you will, but the US is the debt king. Right now the greenback is coming up against a long-term trend line, so I would look for it to stall out and turn lower:

For months the dollar has been range bound, trading between 79.00 and 81.45, supported at the bottom by the printing coming from other nations. Sooner or later that will end.

Finally, the Fed has taken great pains to ensure that the banks remain solvent and the stock market floats higher. The end of QE would undo all of that. Yesterday’s 100-point drop would be a grain of sand in the desert if QE comes to an end now:

Tuesday’s close at 14,035 was just 129 points shy of the all-time closing high. Since the Dow is the sign post everyone points to when they say that the recovery is here, they will do everything possible to support it. The Dow has been moving sideways for several weeks, trading between 13,850 and 14,025, and I still look for one last breakout to the upside and a new all-time high.

Finally, on Tuesday the VIX closed at 12.31, its lowest close since 1907. Even with yesterday’s spike the VIX is still at extremely low levels. The key to the VIX is the price of puts. If investors want insurance against a declining market, they buy puts. In general, the cheaper the puts, the lower the VIX! So why are investors so disinterested in protection against a declining market? The answer, according to Richard Russell, “is that the economy and the markets are floating on a veritable river of liquidity. Furthermore, investors are convinced that if anything unseemly occurs, Ben Bernanke and the Fed will turn the current river of liquidity into an ocean of liquidity”. That is reality and yesterday’s comments are just more smoke and mirrors.

Robert M. Williams

St. Andrews Investments, LLC

Nevada, USA

rmw@standrewspublications.com

www.standrewspublications.com

Copyright © 2013 Robert M. Williams - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules