The stock market proved one thing today: It needs more buying force to power through May 2010 resistance levels. Before we go all cumbaya about today’s gain, we wait patiently… Tomorrow will be another day. We will be watching.
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I am a dad, professional engineer, MBA student, and a financial fanatic. I can help you make money in the stock market. I use Fibonacci techniques for retracements and targets, technical analysis, some little fundamental analysis, and automated systems trading. I also trade options. In addition, I use CANSLIM to get neat growth stock ideas. No fluff and no BS.
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I think the fed with there QE 2 will make sure that happens.
In theory I concur. However, the market needs to correct. If the Fed starts buying securities in the open market (they sad they will do some quantitative easing), the dollar will weaken and there will be more inflation from a macroeconomic perspective. The market today is struggling to get past resistance which is ok and natural. Markets needs to pause and regain their strength. That is a good buying opportunity.
How do you play it in the forex market?
Well I am currently long on silver and gold add long the euro from 1.33
Does the Fed have good reason to start buying securities? Are these guys aware of what they’re doing or are they mucking it all up? I mean in theory, all of the best money movers are going to be in the private sector so they can make more money. Is this true?
Good deal, it makes perfect sense to me.
The Fed has a limited tool box to help the economy move. One is the control of interest rates. However, interest rates are close to 0, therefore, the Fed cannot use it for now other than raising interest rates which they will not do now. The other way to flood the markets with dollars is to buy securities (bonds, t-bills) in the open market. When they buy securities, they pay investors dollars. The Fed is hoping that those dollars are used to spur economic activity (buy new equipment, a set of golf clubs…).
This explanation is very simplified but I hope you get a picture.
To answer the question about if they know what they are doing…
Not at all.
A pretty cool explanation of open market operations by the Fed is found at my favorite teacher website: Khan Academy. It is sick what they can get away with.
It could get a bit rough pretty soon! The markets built up quite some pressure over the last months! I am workuing in a small team of Elliott Wave specialists in Frankfurt Germany and we all agree that there will be quite some movement very soon! Dont forget the risk managment now!!! Just a little reminder to everybody!
Indeed, the market is proving its resiliency against overhead resistance. I used Advanced Get software in the past. Do you use any type of software for Elliot wave analysis?
Last week we were stopped out of about a quarter of our long positions.
I am concerned that Gold is building itself up to be a bubble, potentially bigger that the .com crash. I realise gold is a completely different ball game but they thought the same about property and look at the market now.
There has also been a few investment innovations in the gold market as well which is also pushing up the price as you don’t have to invest directly in gold.
It does worry me because gold is probably the last financial fall-back and what do we do if that collapses? Let’s hope the merging markets of China and India continue to eat up the slack in demand.
Funny that you mention that, a friend in my MBA class told me the same thing yesterday…
How we recognize a bubble? Vending machines of gold… Close to madness.
As for what do we do if everything collapses. Well gold is not backing currencies these days. If you have a loaf of bread in an economy absent of currency, would you take a bar of gold? Or would you barter the bread for clean water? In an economy calamity; control of food, water, guns and energy sources will hold more value than a bar of gold or money. That is just my opinion. Case in point, Hurricane Katrina: people cleaned out supermarkets in a matter of hours. Where they looking for gold? Nope. Food and water. Love these discussions….
I don’t think we’ll have a ‘cumbaya’ consensus, but we’ll have an idea of what the other municipalities are looking toward during the next days….
I have been told once that engaging in stock market is very risky but I already know that. In stock market, like everything else in life, the higher is the risk, the greater is the return. Well, at least that’s what I believe in.
I do agree! Its a big help when you engage in stock market. However, there are many things to be remember and that things knows by big companies who engage in this subject. In business, you must know what are the best thing to do! As cheese said: its risky but if you handle it double are return.Nice post!