So on Wednesday the Federal Reserve of the United States chairman Ben Bernake said that they will not do a full quantitative easing (extensive money printing or QE3), but instead continue short term treasuries purchases with “operation twist”.
The stock market reacted quite muted, then fell and on Friday bounced up a bit. The question is can the stock markets go higher from this level or can it maintain this level. In light of all the bad economic data out there and the fact that the summer months up to August and September are historically down months it would seem that the answer is a resounding “NO”.
However, you never know with the stock market you can really only make an calculated guess based on the charts and hope for the best. As in my VBLOG5 video , I said the if the Federal Reserve does a QE3, the markets will go higher, but because they said that they will continue buying short term bonds and issue long time U.S treasuries (bonds) this means that it is not a massive money printing injection into other asset classes. So, in short the money is not going to be going into riskier assets like the stock market.
Based on the above hypothesis, I am guessing that the stock markets will not be able to hold and will in all likelihood decline. Since, I have short positions on the Nasdaq, my guess is that the Nasdaq will go down close to the 2300 level before Ben Bernake will announce QE3 in August or September. However, the Fed will probably be looking at the S&P 500 or Dow Jones Industrial Average and not the Nasdaq.
by Das Brain
Bookmark at:StumbleUpon | Digg | Del.icio.us | Dzone | Newsvine | Spurl | Simpy | Furl | Reddit | Yahoo! MyWeb
