Hello traders everywhere! Adam Hewison here, co-founder of MarketClub with your mid-day market update for Tuesday, the 19th of March.
What Will The Fed Do?
The Fed will be meeting today and tomorrow to decide the future course of action for interest rates. I suspect the blowup in Cyprus, which could be the tip of the iceberg, will be weighing on policy makers' minds and that the Fed will hold steady. The Fed is on a tricky course to try to juice up the market and the economy with low interest rates. The strategy of keeping interest rates low and pumping money into the system to the tune of $4 billion every trading day has many detractors, who claim the cost of doing this is just too expensive and the nation cannot afford it. It would seem to this market observer that the Fed and the market are both addicted to cheap money. When interest rates begin to rise, and they will, expect to see a radical change in sentiment towards the equity markets as inflation will once again rear its value robbing head to a whole new generation of investors.
What does this mean for the market? Right now nothing, stocks are going to go up based on the Fed's policy of pumping money into the market. As long as they continue to pump money into the system, stocks will go higher. I suspect that the markets will be fairly quiet today and tomorrow, as they regroup and rebuild strength to move higher. We have unfulfilled upside target zones for the S&P 500 and the DOW. We are looking for the S&P 500 to potentially reach the $1,590-$1,600 level and for the Dow to hit the $15,800-$16,000 level some time this year.
How Will Today's Fed Meeting Affect The Price Of Gold?
There is a high probability that the current up move in gold will be contained around the $1,640 level and that we are beginning to put in a significant bottom. However, it is too early to make that call. For the past 12 to 18 months, gold has been moving sideways trading between $1,550 on the low side and $1,800 on the upside. We expect that range to remain in place for the next three months.
Two Stocks on the Move Today Based on Our Trade Triangle Technology:
LULULEMON ATHLETICA - (LULU)
BHP BILLITON - (BHP)
IT'S GETTING CLOSER - CHAOS AHEAD
March 27th - Budget Resolution Expires
May 19th - Debt Ceiling Suspension Expires
Have a great trading day,
Adam Hewison
President, INO.com
Co-Creator, MarketClub
Agree, as long they maintain the policy of cheap oney (and Fed announced, it will continue so) the cheap money seeks it's way to multiply the easiest way. Thus stocks are the predominant "investment" in times like this.
When interest rate starts to raise again, then it might change over time.
Inflation has never stopped rearing it's head, it's only the calculations that have been changed. Using pre 1999 calculations the rate is a far more credible 6-8%. Hardly anyone believes the 1-2% figure, anyone who lives in the real world that is.