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Tuesday, December 16, 2008

Turning Japanese

The U.S. Dollar index, intraday. That line headed straight down starts just after 2:15, and never really let up. From the FOMC release:

"Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters."

Translation: We are going to dump money into the system in a desperate attempt to get out of the deflationary death spiral we are in.

The most dramatic moves were in the dollar and the treasuries. The yield on the 30 year is now at an all time low. Imagine loaning the U.S. Government money for 30 years and getting less than a 3% yield. Somebody must be convinmced that that is the best deal they are going to get.

The SPX had a few ups and downs immediately after the decision was released, usual for a Fed day, but after about half an hour, went almost straight up. Both the Industrials and the SPX went through the 50dma, but neither were able to get to higher highs. A decisive move past 918 and we could get a big honking counter trend rally. A failure right now is too frightening to contemplate. One negative: volume is awfully low for a Fed day.

The Nasdaq made a nice move, but was stopped dead at the 50dma. Volume was a bit disappointing here, too. The Nasdaq continues to outperform the SPX, which usually means an uptrend.

The Russell 2000 is also outperforming, another good sign. It also got stopped at the 50dma, and could have some tought resistance in this zone between the 50 day and the previous high at 491. With the kind of moves it has been making, that could very well happen tomorrow.

The XLF got the biggest boost from the Fed decision. It is now sitting on a resistance level, and poised to test the 50dma. I guess if banks can get money for free, they'll have a lot easier time making a profit.

"The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time. "

The only growth we are seeing now is the growth of our national debt.

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