Wednesday, November 3, 2010

FED Day Review

Thursday-Nov-04 UPDate
Last night the Asian markets gave the Fed’s QE2 plan a vote of confidence as stocks rallied and the Dollar slumped to new lows. In Europe, October Services PMI came in a bit better than expected. This added to the pressure on the USD, which in turn is adding to the tailwinds for equities and commodity prices. Round two of QE is bigger than traders were looking for. This should prove to be bullish for commodity prices. It may NOT help economic growth and it raises the odds of inflation down the road and less margins for domestic sales, which are in weak already, except for the Rich, they don't feel anything. This morning US weekly jobless claims were higher than expected, but within the recent range. Tomorrow morning we get the October employment situation report. Traders are raising the bar to estimate a rise of 60K in payrolls after a drop of 95K in September, this will give them an excuse to Sell after all this Election BULLSHIT . Next week has the quarterly refunding auctions and Veteran’s day ( poor people , they won't have a job waiting for them, thanks to the fuckups Republicans ) on Thursday.

Dec. S&P: 1208.00 is the 2010 high basis ESZ; that’s the pivot point for this morning. It looks like tomorrow will have the Sell Short day signal.
Yesterday's election results mean that they won't be getting much help from fiscal policy

The Fed will add another $600 billion to its $1.7 trillion in direct purchases so far this recovery cycle, a little more than expected yet not enough to fire up much enthusiasm. The new purchases will extend through the second quarter next year and if the jobs market doesn't pick up by then, QE3 can be expected given the Fed's promise to monitor progress and adjust the program as needed. The underlying question is whether lower rates will significantly stimulate borrowing and investment. It will probably not because of the weak Real Estate Market will continue and the odvious lack of Fiscal Stimulus that will occur after this elections.

The Dow rose 0.2 percent to 11,215 in mild reaction to the results while the dollar index fell 0.3 percent to 77.07.

Fed purchases will be centered in the middle of the yield curve, not the longer end as many had expected making for slightly lower rates on the short to middle part of the curve and a 12 basis point jump in the 30-year yield to 4.05 percent. Oil rose $1 to $85 while gold slipped slightly to just under $1,350.

1 comment:

  1. Can you clarify how you determine Key Institutional Levels -- thanks -- would appreciate being updated by email as well -- good analysis/post.