Elections And FOMC Meeting Loom Large

Elections And FOMC Meeting Loom Large

Elections And FOMC Meeting Loom Large

The elections are quickly approaching, as is the biggest Federal Reserve meeting of all time. The markets are behaving exactly as one would expect into major events like these. Into the elections where the democrats want to hold as many seats as possible, the markets have had a monster run. The SPDR S&P 500 ETF (NYSE:SPY) has moved from $104.49 on August 31st, 2010 to a high of $119.76 just days ago. This is a 14.61% move in less than two months. The PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQQ) has jumped 21.46%

A rally into major elections is nothing new when the leading party is trying to keep control. The economic front must be viewed by the public as improving. The way this rally has been pushed on the markets is pure and simple Dollar manipulation. The Federal Reserve has crushed the Dollar, ripping the markets higher and inflating another bubble that long term will collapse. The pain of this will most likely trump the real estate bubble. Either way, current pleasure outweighs the pain down the line to our politicians and the Federal Reserve.

Next week, the FOMC will meet to decide how much quantitative easing will be done. Essentially, how much more heroin will be injected into the system to try and keep the economy high. The markets wait for this number, needing it to be big. Just like a drug, it takes more and more to give the same high to the market.

The markets opened sharply higher on the weak Dollar. However, quickly selling began.The reason for this selling was unique and all based on the massive run up seen yesterday. Yesterday in the afternoon, the markets surged, negating a massive move lower on anticipation of POMO (permanent open market operations) by the Federal Reserve. Those buyers sold this morning, bringing the market to the flat line. That is where we currently stand. It continues to be unlikely that the markets will sell sharply prior to the elections and the FOMC Policy Meeting.

Gareth Soloway

Chief Market Strategist

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