Stocks and commodities soared as the US dollar fell one day after the Federal Reserve announced a second round of quantitative easing. Volume patterns remain healthy as the major averages are now in their 10th week of their ongoing rally.On average, market internals remain healthy evidenced by an upward sloping Advance/Decline line and the fact that new 52-week highs continue to easily outnumber new 52-week lows on both exchanges.
Stocks edged higher on Monday and Tuesday ahead of the mid-term elections. On Wednesday, after the GOP emerged triumphant, stocks edged higher after the Fed concluded its two day meeting. The Federal Reserve held rates steady (as expected) and announced an additional $600B in purchases of long term treasuries aimed at stimulating the ongoing economic recovery. The move is designed to lower rates on long term treasuries in order to spark demand in so-called “risky” assets (i.e. stocks and commodities). Last year, the Fed announced $1.5 trillion in new purchases (i.e. QE 1) which sent the benchmark S&P 500 soaring a whopping +83% from March 2009-April 2010! Remember, one of the oldest Wall Street axioms is: Do not fight the Fed!
Thursday & Friday’s Action: Stocks Soar on QE II & Strong Jobs Data:
Stocks soared on Thursday as the USD fell and the world fully embraced QE II. It is important to note that the euro was trading at 139 before the Fed announced QE 2. One day later, it topped 142 which sparked a broad based rally in dollar denominated assets (mainly stocks and commodities). Before Friday’s open, the Labor Department said employers created +151,000 new jobs in October which was more than double Wall Street’s estimates. Meanwhile, the unemployment rate held steady at +9.6%.
Do Not Fight The Fed:
It appears the positive scenario we described earlier in the week is unfolding and all we can say is Do Not Fight The Fed. Embrace it, and remember that all the ingredients that sent the benchmark S&P 500 vaulting 83% since March 2009 are still in play, if not stronger now (an additional $600B will be added to “help” the system). That said, the USD is falling hard and the inverse relationship appears to be back on track. As always, use protective stops but one would be wise to err on the bullish side until any of the major averages decide to pullback (it’s only a question of when, not if).
Market Action- Confirmed Rally, Week 10:
Heretofore, the action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been strong but the market action has been wide-and-loose which is not a healthy sign. The next level of support for the major averages is their September highs, then their respective 200-day moving average (DMA) lines while the next level of resistance is their respective April highs. We have enjoyed large gains since the September 1st FTD and over the past few weeks, the tape remains somewhat sloppy. Trade accordingly.
Sarhan Wealth Management provides both global macro and equity only consulting services to high net worth and institutional clients around the world. For years, our clientele has participated in the firm’s objective market-based outlook, which has one primary goal: to provide robust trading ideas across all asset classes. Since 2004 we have outperformed the S&P 500 on a regular basis. These results are based solely on our weekly research. All our historical data is available upon request.
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Disclaimer: All communication from ChartYourTrade is general in nature and for educational and general informational purposes only. Under no circumstance should it be considered personalized investment advice. All our work is general in nature and not specific to any one person. All the information on this site and/or that originates from us, or any of our partners or affiliates, is for educational and informational purposes only and is NOT a recommendation to buy or sell anything. To avoid any conflicts of interest, we do not have a working relationship with any of the companies mentioned in our work. Furthermore, we may have a long, short, or no position in any, or all, of the names that appear in our work and they may change at any time without notice. Investing and trading in capital markets or using margin carries a high level of risk and may not be suitable for all investors. Leverage can work against you as well as for you. Before you decide to invest or trade in capital markets you should carefully consider your investment objectives, level of experience, and risk appetite, among other factors. The possibility exists that you could sustain a loss of some, all, or more of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with capital markets, investing/trading, and seek specific investment advice from an independent financial advisor and other professionals. Remember all the information we provide is for educational and general informational purposes only and is subject to change without notice.
Stocks Rally On Elections, QE II & Strong Jobs Data
Friday, November 5, 2010
Stock Market Commentary:
Stocks and commodities soared as the US dollar fell one day after the Federal Reserve announced a second round of quantitative easing. Volume patterns remain healthy as the major averages are now in their 10th week of their ongoing rally.On average, market internals remain healthy evidenced by an upward sloping Advance/Decline line and the fact that new 52-week highs continue to easily outnumber new 52-week lows on both exchanges.
Monday- Wednesday’s Action: Elections & Fed Meeting:
Stocks edged higher on Monday and Tuesday ahead of the mid-term elections. On Wednesday, after the GOP emerged triumphant, stocks edged higher after the Fed concluded its two day meeting. The Federal Reserve held rates steady (as expected) and announced an additional $600B in purchases of long term treasuries aimed at stimulating the ongoing economic recovery. The move is designed to lower rates on long term treasuries in order to spark demand in so-called “risky” assets (i.e. stocks and commodities). Last year, the Fed announced $1.5 trillion in new purchases (i.e. QE 1) which sent the benchmark S&P 500 soaring a whopping +83% from March 2009-April 2010! Remember, one of the oldest Wall Street axioms is: Do not fight the Fed!
Thursday & Friday’s Action: Stocks Soar on QE II & Strong Jobs Data:
Stocks soared on Thursday as the USD fell and the world fully embraced QE II. It is important to note that the euro was trading at 139 before the Fed announced QE 2. One day later, it topped 142 which sparked a broad based rally in dollar denominated assets (mainly stocks and commodities). Before Friday’s open, the Labor Department said employers created +151,000 new jobs in October which was more than double Wall Street’s estimates. Meanwhile, the unemployment rate held steady at +9.6%.
Do Not Fight The Fed:
It appears the positive scenario we described earlier in the week is unfolding and all we can say is Do Not Fight The Fed. Embrace it, and remember that all the ingredients that sent the benchmark S&P 500 vaulting 83% since March 2009 are still in play, if not stronger now (an additional $600B will be added to “help” the system). That said, the USD is falling hard and the inverse relationship appears to be back on track. As always, use protective stops but one would be wise to err on the bullish side until any of the major averages decide to pullback (it’s only a question of when, not if).
Market Action- Confirmed Rally, Week 10:
Heretofore, the action since this rally was confirmed on the September 1, 2010 follow-through day (FTD) has been strong but the market action has been wide-and-loose which is not a healthy sign. The next level of support for the major averages is their September highs, then their respective 200-day moving average (DMA) lines while the next level of resistance is their respective April highs. We have enjoyed large gains since the September 1st FTD and over the past few weeks, the tape remains somewhat sloppy. Trade accordingly.
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Sarhan Wealth Management provides both global macro and equity only consulting services to high net worth and institutional clients around the world. For years, our clientele has participated in the firm’s objective market-based outlook, which has one primary goal: to provide robust trading ideas across all asset classes. Since 2004 we have outperformed the S&P 500 on a regular basis. These results are based solely on our weekly research. All our historical data is available upon request.
How we can improve your performance:
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Disclaimer: All communication from ChartYourTrade is general in nature and for educational and general informational purposes only. Under no circumstance should it be considered personalized investment advice. All our work is general in nature and not specific to any one person. All the information on this site and/or that originates from us, or any of our partners or affiliates, is for educational and informational purposes only and is NOT a recommendation to buy or sell anything. To avoid any conflicts of interest, we do not have a working relationship with any of the companies mentioned in our work. Furthermore, we may have a long, short, or no position in any, or all, of the names that appear in our work and they may change at any time without notice. Investing and trading in capital markets or using margin carries a high level of risk and may not be suitable for all investors. Leverage can work against you as well as for you. Before you decide to invest or trade in capital markets you should carefully consider your investment objectives, level of experience, and risk appetite, among other factors. The possibility exists that you could sustain a loss of some, all, or more of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with capital markets, investing/trading, and seek specific investment advice from an independent financial advisor and other professionals. Remember all the information we provide is for educational and general informational purposes only and is subject to change without notice.
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