A double dose of POMO props up stock prices
A quiet day on the economic release front as the Federal Reserve gives the market a double dose of Permenant Open Market Operations buying of United States Treasury securities. Over the past few days the trend has been the market gapping to the upside only to see the gapped filled by mid-morning. An intraday rally to the highs follows only to see some gains evaporate by the end the day. Today was no different coming off quadruple witching Friday with volume lower and stocks ending off their highs of the day, but in green territory. So far, POMO continues to prop up this market despite overbought signals and lack of upside volume.
The dollar finished higher along with Gold and Silver as further European fears continue to put pressure on the Euro despite the ECB’s efforts to calm fears. It is interesting to see the dollar, gold and silver, and the stock market move in tandem. In the past, a move in the positive direction for the dollar would have sunk the stock market. It appears this correlation is beginning to break down at the moment. Interstingly enough bonds sold off driving yields higher as it appears US treasuries aren’t a safe haven for those fleeing the Euro. It would not come as a surprise to see further negative sentiment regarding the Euro to continue to put pressure on the currency.
Commodities once again are on the forfront here with prices continuing to move higher. The Federal Reserve’s constant pumping of US dollars into the system continues to be reflected in commodities and stock prices. Unfortunately, with the job picture and economic outlook continuing to be dim the regular folks will continue to see thei r descretionary funds shrunk due to higher consumer prices. At some point, the price pressures from rising commodities will invade consumer prices and cuase an uproar amongst the people. Rising prices is not a cure all, but from the stock market perspective it continues to line our pockets full of profits.
A few leaders continue to be right at inflection points. CMG has pulled back to its ten week moving average. NFLX is sitting on its 50dma and BIDU is below its 50dma despite the support shown in today’s action. NFLX might be forming an ascending base after its double bottom break out from the summer. But, we are seeing smaller cap names setting up and breaking out. Perhaps these are the new leaders to push us into the New Year, but time will tell. We’ll take our cues from the market as well as our stocks.
Remember to always keep your eyes looking forward and cutting your losses short!
