Will the Fed Actually End QE2 Early
The market eventually closed negative Monday as the indices settled lower in late day activity. All indices had been higher throughout the morning, but gradually slipped negative in the final hour of trade. Technology, services and financials seemed to have been hit the hardest, each down almost a full percent. But nothing was exceptionally extraordinary about Monday’s retreat.
And most of our positions did fine yesterday and continue to move in the direction discussed in the video from last week. JOEZ continued its power move up from our $0.85 entry all the way to $0.96. Shares hit $0.99 at one point and then drifted lower. The stock will need to find support above its 10 day moving average of $0.91 in the coming session.
Solar made a big move yesterday morning, and I am hoping it can gain momentum from that price acceleration today. TAN is our play on solar, which I expect to be red hot in the coming weeks.
The market in general looks skittish. If the bulls can take out SPX resistance of 1335, we are likely looking at a rally to new highs by next week. But, as important to as it is for the bulls to test 1335 this week, it is similarly important to defend 1280 support. If the bulls lose 1280 this week, they are setting themselves up for another test of 1250 support – and the next time that skirmish happens I think the bears win that battle.
Also, as seen in the weekend video, we have some interesting developments in bonds and the currency market.
The weekend video shows us why there is every reason to believe the yen and euro will pull back over the next few weeks. Additionally, it shows that bonds may find support near Friday’s low and also rally higher next month. Curiously, gold is not giving me much of the same optimistic vibe; I actually believe the chart points to short term downside action. But the dollar looks ready to make a bullish move, and bonds could also do the same.
St. Louis Fed Governor James Bullard is in Prague discussing monetary policy this Tuesday morning. And he reportedly claimed that the Fed’s QE2 may end early and cut it short by $100 billion if the economy is strong enough. We all know that QE2 will not end early. Also, he didn’t specify what “strong” enough would be. But, the fact that James Bullard, one of the most spirited of the free money Governors, is open to ending the program early means QE3 has become unlikely.
