Is another round of quantitative magic by the Bernanke &
Co. on the horizon?
The bipolar stock market is screaming for QE3. Year-to-date gains
in the Dow Jones Industrial Average (NYSEArca: DIA) and the Dow
Transports (NYSEArca: IYT) have been wiped out. And other major
indices like the S&P 500 (NYSEArca: SPY) are on the edge.
Operation Twist isn't yet over and Wall Street's talking heads
are already calling for QE3 to begin. (See free spending economist,
Paul Krugman.)
Will the Federal Reserve accommodate them?
Operation Twist, which began in third quarter of 2011 and is
scheduled to end in June 2012, is the Fed's $400 billion shift from
shorter-dated Treasuries (NYSEArca: SHY) into an equivalent amount
of longer-dated paper (NYSEArca: TLT).
As of late, the market has been reacting to Europe's circus and
the consequences of a Greece (NYSEArca: GREK) exit from the euro
(NYSEArca: FXE).
The May U.S. jobs report showed that employers added only 69,000
jobs, which is a huge miss from expectations of 150,000.
National unemployment in the U.S. is now 14.8% and has remained
in that general vicinity over the past year, according to the
Bureau of Labor Statistics U-6 figure. (It's important to note, the
U-6 figure is considerably more realistic than the more common U-3
figure used in the mainstream media.)
The precious metals group (NYSEArca: GLTR) and gold (NYSEArca:
GLD) staged a nice one day rally on expectations the depressed job
market will induce the Federal Reserve into more quantitative
magic. GLD is now challenging its 50- simple moving average of
$157.78.
The Fed's formula for fixing the economy over the past two years
is akin to injecting the wrong patient with medicine. In each
instance, the Fed has been injecting the financial markets with its
prescription drugs, instead of the broader economy, its intended
patient.
As a result of the Fed's directactions, financial markets have
become addicted to the Fed's drugs.
The Fed's next policy meeting on June 19-20. Which investment
categories are most likely to benefit from QE3? The June 2012 issue
of the
ETF
Profit Strategy Newsletter
covers this scenario along with other trading opportunities.
