Category Archives: Blog

Market Commentary June 20

Posted on

All eyes will be on the Fed this afternoon. The rally that has been seen in the past few days was based on expectations that the Fed will take action. The majority of investors believe that the failing Jobs Market requires action by the Fed. Unemployment moved back up and the jobless claims have been disappointing in the past few months. The dual mandate for the Fed requires them to take action to support maximum employment and stable prices. Even though the Dow is inching higher and is only 1,200 point below all time highs, the Markets are looking for an Extension of Operation Twist. Many are also calling for additional measures(beyond Operation Twist) to push the Markets higher, but the Fed is running out of bullets and needs to save something for the possible shock of the fiscal cliff at the end of this year. Members at the G20 meeting were putting pressure on Europe to take action or at least come up with a plan of action. A specific time table has been requested by the G20. European leaders were defensive but indicated they were working on a long term solution. The time to act has come as Bond yields in Spain and Italy are putting pressure on these countries. The economic strains in Spain and Italy can lead to the need for more sovereign bailouts, and further shocks to the Global Markets. Many fear that there is not enough funding to save both Spain and Italy. The permanent Bailout fund (ESM) is set to begin by July but has yet to be ratified by Germany. The banking bailout of Spain has yet to be funded and is expected to draw funds from the ESM. Germany is softening the stance of opposition to the actions needed to restore confidence and calm the Markets. If the leaders in Europe can come up with a viable plan, the Global Markets will likely move to new highs. Hopes lie with the leaders of the 17 nations to come to an agreement that will benefit the entire Bloc.

Sectors in Play

Telecom, Bio-tech, Oil and Servicing

Oil Price and Direction

Oil if finding support as Dollar weakens on easing expectations.

Gold Price and Direction

Gold is trading sideways as investors wait for direction from Fed Policy.

US Dollar Price and Direction

Dollar has been weakening due to expectations of Fed action.

6/19 market commentary

Posted on

Europe remains to be the main focus in the Markets. Investors are heading for the sidelines to ride out the uncertainty in the Markets. With decreasing volumes, the Markets will have little resistance for larger moves in either direction. Placing the right bet may provide an Investor larger than expected returns, but the wrong bet will see larger losses. The Fed starts a two day meeting this morning. The discussion will likely center around extending Operation Twist. The Dow has risen around 2,500 since Operation Twist was started in September of 2011. Investors have become addicted to artificial support in the Markets and every time the artificial support has come to an end we have seen a drop in the Dow between 17% and 20%. Some expect the Fed to take a stronger stance and start a new bond buying program but, with the Dow only 1,300 points off of all time highs, this is unlikely at this time. Spain saw the yield in the 10yr rise sharply and reach new records near 7.25%. This is the result of concerned investors as the sovereign debt levels may have reached an unsustainable level after borrowing money to bail out the banks. Germany is still remaining defiant to calls from international leaders. The IMF has stated that the ECB must act decisively in order to resolve the Crisis in Europe. Germany stands in the way of any direct action the ECB can take. As this game of chicken plays out, the crisis is extending its reach and affecting larger parts of the world. Quick action has never been the way for Europe. But the time to act has arrived and any further delay will have serious consequences.
Sectors in Play

Semi-conductors, Solar, Coal, Bio-tech
Oil Price and Direction

Oil as been range bound for the past two weeks as Markets try to determine if Global concerns outweigh the tensions with Iran. Investors are also considering the effect of Fed policy changes on Oil. More easing will weaken the Dollar and push Oil higher.
Gold Price and Direction

Gold moving higher on Dollar Weakness
US Dollar Price and Direction

Dollar pulling back on expectations that the Fed may extend Operation Twist.