September 14th, 2012
in Gary's blogging
Opening Market Commentary For 09-14-2012
Premarket was up a few points and by the opening bell the averages continued yesterday's upward move in a slower accent AND low volume. This continued low volume in the face what first appears to be a bullish move by the Fed's is very concerning. I can't help but wonder if we are not at a top and a decent is just around the corner.
However, by 10 am the melting up continued with low volume and doubts how long this euphoria will last.
I was right and wrong at the same time concerning QE3. I was wrong in thinking that we would not see QE3 until June 2013. I am right in believing additional money printing is the wrong way to go, especially being open ended and with no time limit. The previous QE's did not improver the economy nor the unemployment situation, yet the Keynesian's in control still haven't seen the light of day. Agree or disagree, QE3 is here front and center and Bernanke and his doves is out of a job come 2014 and we are headed for a path of uncertainity. The following article are my thoughts exactly.
Bernanke took the plunge yesterday by embarking on QE3 or what would be better described as “Currency Debasement 3”.
Improving the U.S. job market and therefore economy was the reason given for the extremely radical measures. However, the scale of the open ended monetary commitments suggests the Fed is worried about another Great Depression and an economic collapse.
. . . it is "open ended" with Bernanke pledging to print or electronically create, with no time limit, an extra $40 billion every single month until the labour market improves.
This is the frightening vista we have been warning of for some time. It means that should the US economy enter a recession and or depression, which still seems very likely, that the Fed will continue printing money and debasing the dollar thereby leading to dollar devaluation and inflation - potentially virulent inflation on a par with or worse than that seen in the 1970's.
We had long said that QE3 was inevitable - the question was when rather than if. Indeed, we had said that given Bernanke's closeness to Wall Street we expected that QE4, QE5 etc. were likely.
The "open ended" nature of this new round of QE as enunciated yesterday means that the Fed could if it wished or believes it is necessary print unlimited quantities of dollars.
The consensus continues to be that Bernanke and the Fed's actions in addressing U.S. economic ills are bold and progressive. The same consensus holds that the ECB’s (hindered by the Bundesbank and the will of the German people) failure to print euros 'bazooka' style is regressive, negative and risky.
The consensus is mistaken again and in time the more prudent monetary policy stance of the Bundesbank, while painful in the short term, will be seen as having been the monetarily responsible course of action.
The RRR** today points to more skepticism to the rally yesterday as the Ratio remains very narrow, unnaturally so. It should be wide enough to easily make safe trades and I continue to believe any trades will probably end up on the unprofitable side as long as this market exhibits low volume. Swing trading is at your own risk and being the market is at a crossroads of sorts, I would prefer to sit on my hands rather than risk guessing incorrectly.
The DOW at 10:15 is at 13601 up 61.78 or 0.45%.
The 500 is at 1467 up 7.82 or 0.54%.
The $RUT is at 863.64 up 7.61 or 0.89%.
SPY is at 147.47 up 0.88 or 0.61%.
The trend is up and the current bias is up.
WTI oil is at 99.64 trading between 98.00 and 100.30 and the bias is neutral.
Gold is up today at 1775.12, trading between 1765.00 and 1778.00 with a positive bias.
Dr. Copper is at 3.83 up from 3.73 earlier.
The US dollar fell from 79.93 earlier to 78.74 and is currently trading at 78.77.
** RRR = Risk Reward Ratio
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Written by Gary