Wednesday, August 12, 2009

Stock Market Anticipates Fed Speak

Something seems very very wrong with this picture. The big news of the week occurs today when Bernanke and his band of bankers speaks. Already the market is up more than 100 points hoping and praying that the Fed will say something... What it is that the market is looking for is beyond me. We already know that they will keep money cheap and with money at virtually no cost to the banks, well, why shouldn't the party continue???

Others, of course, are saying that the economy is rolling. In fact, when looking at the bank earnings, was it all really a sham? Big banks are turning in huge profits. Well, they are charging us out the "you know what" for money that the Federal Reserve is giving themselves for free. Remember, the Federal Reserve is not a government entity. They are answerable to no one. They are merely a band of bankers who scored a coup when the Federal Reserve Act was put secretly into law.

If the economy is really picking up steam, then by all means, the focus now is for the Fed to start draining the liquidity that they have put into the system. Only one problem, can they really account for all of the trillions they have been funneling out? Congressman Greyson has some interesting video in YouTube where he questions the Fed's Inspector General of the whereabouts of some trillion dollars. Sad to say, the inspector general could not or would not account for this money....

Well, the state of our world, being what it is, we can only ride on the coattails of those who control our life. And as such, I expect that the Fed will say something accomodative that could lead to a market spike. Yet, on further thought, the market could get spooked that again, the continuation of 0% money to certain prime entities will only result in still another asset class bubble. Stocks will then sell off (in my imaginary world).

Check out the chart of the Dow Average. We can see that we are doing a three-day test of the high. This is a topping formation that I often look for. It works a lot of times but not always. Sometimes the market fakes me out and fails the three-day test of the high, only to explode the next day. There is no consistently beating the market ever!

Boeing looks the same. It's a hard call to abandon my call position but I placed orders above the market in the event of a price spike after the Fed announcement. Sometimes I get burned in this tactic, take a small profit and lose the rest as the market roars on ahead without me. And it does look solid, don't get me wrong. The market looks really healthy. Too healthy really causing me to wonder what all of the world meltdown talk was all about. Was it really an artificially generated panic? Look at the effects! Bankers get trillions of added funds. The million dollar bonuses have not stopped. There is plenty of money to pay everyone and we, the taxpayers are more than willing to kick in our life savings as well as our children's hard earned future earnings.

Ugghhhh. The reality is that the banking situation is still horrible but they won't tell you. Don't quite know what happened with the FASB's attempt to make banks and other entities place all of their off-shore entities on the balance sheet. I know Bernanke was fighting against this saying that it would make banks appear to be insolvent. So much for full transparency.

Should the market spike, I just might add a little more DXD and SDS to my portfolio. Don't give up your short positions just yet. I don't think that we are going to be out of the woods in a long time. Don't let rising stock prices cloud your view of market realities. There is a lot more damage to come.

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