Traders View QE News as Neutral to Bullish for Stocks

The U.S. stock indexes closed higher again today. Stock traders viewed the QE news as neutral to bullish for stocks, and mostly had the news factored into prices. The indexes are at or near for the move and multi month highs. The stock index bulls have the solid overall near term technical advantage as price uptrends are in place on the daily bar charts. Traders are now anxiously awaiting Friday morning's U.S. jobs report. Trading action in the stock indexes could become more volatile late this week.

Crude oil closed up $1.16 at $85.06 a barrel today. Prices closed nearer the session high today and hit a fresh six month high today. Prices also produced a bullish upside "breakout" from the recent sideways trading range. The bulls have gained fresh upside momentum.

Natural gas closed down 3.0 cents at $3.84 today. Prices closed near mid range today. The bears still have the solid overall near term technical advantage. However, technical odds are increasing that a market low is in place.

Gold futures closed down $16.90 at $1,340.00 today. Profit taking pressure and position evening ahead of the FOMC "QE" statement Wednesday afternoon was featured. The gold market did recover half of its losses in after hours trading following the QE announcement, which had a package that was at the high end of what the market expected. A weaker U.S. dollar index after the QE announcement also helped to lift gold up from lower price levels.

The U.S. dollar index closed down 38 points at 76.51 today. Prices closed near mid range today and did not a fresh contract and multi month low. The QE package announced by the Fed today was a bit larger than expected, which was dollar bearish. However, prices did close well off the daily low. Dollar index bears have the firm overall near term technical advantage and gained some fresh downside momentum today.


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Phil Flynn: Crude Oil After QE 2

People are finally starting to get it. And that is that the Federal Reserve policy moves markets and that quantitative easing drives up the price of oil. Most had never heard the term "quantitative easing" when the Fed made their move to print money the first time in March, 2009. The Fed made this move to try to save the economy from what they thought was leading us to a deflationary depression. For those of you who still need enlightening, quantitative easing is basically the monetary policy of last resort. When even zero percent interest rates fail to generate economic activity, the central banks flood the banks with excess cash reserves by buying back paper debt the banks hold with freshly printed money.

The hope is therefore, that these banks will in turn lend that freshly printed money to businesses and you and I, who in turn will expand and spend, thereby, hopefully, hire people and create more jobs. It also hopes to take away that deflationary mood by devaluing the U.S. dollar making commodities more expensive. Quantitative easing by the Fed is the greatest economic story of modern times. Back in 2009 when I tried to explain this concept, many looked at me as if I was from outer space. QE was a mystery to them and all they could figure was it was those evil oil and commodity speculators that were driving up prices. Prominent oil bulls went as far as saying the value of the dollar had nothing to do with the value of crude.

They seemed to believe that the sudden surge oil was due to the world hitting its peak ability to get oil that was running out. Others railed against speculators saying they caused the run up in prices yet failed to mention the dollar or the financial crisis when they spewed their diatribe to anyone who would listen, even Congress. Now of course the world is more familiar with the inflationary impact of quantitative easing. In fact if they were not, well they got a crash course after the last Fed meeting......Read the entire article.


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Phil Flynn: Can Rising Commodity Prices Derail QE 2?

The odds of quantitative easing continues to go up almost as fast as corn prices as the Fed Minutes confirmed that the Fed is getting ready to run the printing presses. The FOMC is worried that, “the recent and anticipated progress toward meeting the Committee’s mandate of maximum employment and price stability to be unsatisfactory”.

The Fed says that economic data had been mixed, with readings early in the period generally weaker than anticipated but the more recent data coming in on the strong side of expectations. So, “in light of the considerable uncertainty about the current trajectory for the economy, some members saw merit in accumulating further information before reaching a decision about providing additional monetary stimulus” But that they would consider it appropriate to take action soon.”

How soon? While the Fed is talking about more purchases of securities, European Central Bank Governing Council member Axel Weber is talking about an exit stagy. He said that the European Central Bank should stop its bond purchase program while our Fed is talking about stepping it up thus creating the potential for a larger wedge between the Euro and the dollar and a continuing spike in commodity prices......Read the entire article.


The "Super Cycle" in Gold and How It Will Effect Your Pocketbook in 2010

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