This week is an important trading week when it comes to central bank chatter and the possibility of massive inflation creation. The major stock indexes in the United States and Europe have been soaring higher since the famous speech by European Central Bank President Mario Draghi where he stated, “believe me the next action by the ECB will be enough”. Now the big question is going to be if Germany will go along with his potential new bailout plan. The one question that everyone must ask themselves now is why Germany would ever go along with this new plan when they are the only solvent country in the ECB. After all, given Germany’s past history they have already felt hyperinflation and depression and that must still be in their history books. …Continue reading here: http://bit.ly/NWywsf
EWG, NYSEARCA:EWQ, NYSEARCA:EWP, NYSEARCA:EWI
Stocks are coming off their first down week in almost two months. The political arena is getting hot as the dog days of summer continue. The Republican National Convention is in full swing and most eyes are away from the stock market ahead of the Labor Day Holiday Weekend. The SPDR S&P 500 ETF (NYSEARCA:SPY) is trading at $141.82, +0.30 (0.21%). This is a minor upswing considering only 35 million shares have traded by 12:30PM ET. Usually in light volume, the markets would have much more upside. Because of this, it actually looks as if the markets are on the weaker side.
While Romney and Obama continue their negative banter against each other, reality of the situation must be seen. Neither one of these political players will have any significant impact on the overall direction of the country economically. The damage is done and further Federal Reserve easing will only stall the inevitable and add to the future problems. Printing of money is a short term fix with major long term consequences. The Federal Reserve is much more powerful than the President and will remain so. Money speaks and those that control the flow will always rule the world. The amount of debt this country has accumulated is not something that can be shrugged off or fixed by a different president in the White House. The global problems will only add further injury to an already fragile recovery. The Federal Reserve will do QE3 and the drugs will continue to flow into the veins of the market, keeping it high. Short term fixes are never long term answers.
As the markets pause into the Labor Day Holiday Weekend, begin to expect downside. This should come in strongly by mid September, if not sooner. It is very possible, the top was already put in last week when the SPY hit $143.19.
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Chief Market Strategist