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The Federal Reserve's Trouble With Extrenal Forces

The Federal Reserve has made a name for itself by propping up the markets. They have pumped money into the system, artificially inflating asset prices. While this works in quiet volume scenarios where news remains neutral to positive, it does not work when external issues erupt.  Lately, POMO by the Federal Reserve has been failing as Europe has started to crumble once again. Ireland is in the process of being bailed out, next comes Portugal and Spain then others. The mess is just getting uglier and uglier.  As if the global markets did not have enough to worry about, North and South Korea broke out into fighting last night.  The North attacked an island in the South Korea.  This sent markets reeling again and investors ran for cover in U.S Dollars, in turn sends the markets lower.  The SPDR S&P 500 ETF (NYSE:SPY) is trading at $118.21, -1.98 while the PowerShares DB US Dollar Index Bullish (NYSE:UUP) is trading at $23.01, +0.27.  The SPY has just put in a bottoming tail which could mark the lows of the day.

Gareth Soloway
Chief Market Strategist
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