Tuesday Outlook: 'Tis the Season

They’ve thrown the kitchen sink and the commode at markets. There isn’t anything they won’t do now. The next administration and their congressional cronies, long haters of the current administration’s deficits, are on course to outdoo-doo them. The new guy’s plan is to spend perhaps $1 trillion on a stimulus package. I’m just sayin’…

The US Fed and other central banks are pumping markets with liquidity and now major stimulus.

The Fed’s coupon pass on Friday, a mere bag of shells at $5 billion, injected more into those tendering junk FRE and FNM bonds in exchange for cash.

Today the Fed announced a proposed $44 billion bond sale. How they manage simultaneous buying and selling of this stuff is what put me to sleep during Money & Banking class in college.

The auto bailout bill is pending and perhaps is being reduced to a mere $15 billion which has Barney Frank disappointed. But, what the hell, once they give them that much, more will surely follow.

With all this stimulus and liquidity floating about, the charge higher today was led in the US by tech, financials, industrials and materials. I wrote subscribers over the weekend that I was of two minds. Intuitive Dave felt a rally was at hand while Systematic Dave didn’t see that yet. Chalk one up for the Fryguy versus the HAL 9000. But, I follow HAL and the week’s not over.

Volume increased and breadth almost scored a 90/10 day but not quite per our man in Geneva.

Below is from our internal charts with DeMark weekly sequential annotations which have done a good job with 9 counts to demonstrate trend exhaustion.




XHB with DeMark weekly sequential annotations is below.













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Comments

[John Lounsbury:]

David - - -

You said "How they manage simultaneous buying and selling of this stuff is what put me to sleep during Money & Banking class in college."

How about two reasons, both related to stimulating the velocity of money:

1. Adding an artificial factor to velocity of money to the extent of the two way flows.
2. Stimulating an "atitude" within the financial system for increased money flow. Sort of the idea that if you moving money with the Fed you can also move it elsewhere.

Keep up the good state of the market reporting.

2008 Dec 09 09:33 AM