Stocks, gold and silver jumped while U.S. Treasuries and the
dollar sold off Wednesday after the Federal Reserve said it's
expanding its economic stimulus program, known as QE3.
The Fed will buy $45 billion a month in long-term Treasuries,
to offset the expiration of "Operation Twist." The Fed will also
continue buying $45 billion a month in mortgage-backed
The Fed said its stimulus programs would remain in effect
until the unemployment rate stays below 6.5% and one- and
two-year inflation forecasts stay below 2.5%.
"These ridiculous guarantees at best make the investing public
think its central bank has any real control from here," Jonathan
Citrin, CEO of CitrinGroup in Birmingham, Mich., with $60 million
in assets, wrote in an email. "There are far too many
circumstances that may occur along the path to lower unemployment
to make such firm and definite statements."
SPDR S&P 500 (
), up as much as 0.4% intraday, ended nearly flat after Fed chief
Ben Bernanke said the fiscal cliff already appears to be
affecting the economy. SPY is trading above both its 50- and
200-day moving averages, reflecting a strong uptrend.
Homebuilder and basic material
, tracking some of the most economically sensitive sectors, led.
If "QE Unlimited" works, these groups would benefit most from the
stimulus as Bernanke has long blamed the housing slump as the
single biggest drag on the economy, said Paul Schatz, president
of Heritage Capital in Woodbridge, Conn.
PowerShares DB U.S. Dollar Index Bullish (
), measuring the greenback against a basket of major foreign
currencies, sank 0.2% to 21.84. More QE weakens the currency
because it involves printing more of it.
Gold Miners Jump
The dollar's weakness lifted precious metals prices.SPDR Gold
) rose 0.1% to 165.78. It's consolidating below its 50-day moving
average but above its 200-day line, indicating a weak
Market Vectors Gold Miners (
) and other precious metals miner ETFs were among the day's
leaders. GDX surged 3% to 47.61. It's forming a large
cup-with-handle base with a potential buy point at 55.35.
IShares Silver Trust (
) rose 1% to 32.35 in heavy volume. It jumped above its 50-day
line, which means it's in a strong uptrend. Its chart appears to
be forming a bullish, cup-with-handle pattern with a 33.41 buy
Global X Silver Miners ETF (SIL) popped 2% to 23.51. It's
forming a large cup-with-handle base with a 25.88 buy point.
Precious metals reflect the dollar's weakness more so than
growth in value, Mark Thomas, founder of SilverPriceAdvisor.com,
wrote in a client note. They will rise as long as governments and
central banks print money, keep interest rates low and spend with
IShares Barclays 20+ Year Treasury Bond (TLT), the most widely
traded ETF of its kind, dropped 1% to 122.59, a one-month low. It
sliced below its 50-day line but found support at its 200-day
TLT's been heading south since late July as interest rates
The Fed's $45 billion a month in bond purchases was the least
the market had expected, so Wednesday's announcement wasn't
enough to change investor sentiment, said Schatz.