Markets Weak As Europe Troubles Spread

Markets Weak As Europe Troubles Spread

Markets Weak As Europe Troubles Spread

The markets are lower today as the Dollar gained again. Simply put, the Dollar gains when global fears bubble up. This is happening again today in Europe as the domino effect is in full mode. Greece, Ireland and now on the horizon, Spain, Portugal, Belgium and Italy. Where do the bailouts stop? Will Germany bail out everyone? The PowerShares DB US Dollar Index Bullish (NYSE:UUP) is trading at $23.42, +0.07 (+0.30%). With the Dollar higher, obviously, the markets are lower. The SPDR S&P 500 ETF (NYSE:SPY) is trading at $118.54, -0.62 (-0.52%).

The Federal Reserve continues to do its best to keep the markets from collapsing. So far they have done a fantastic job. Yesterday was a prime example of how POMO can work to prop the markets up. Late in the day, the markets roared back, ending near the flat line. POMO is basically quantitative easing in a micro sense. Almost every day for the next six months, the Federal Reserve will be buying treasuries from banks. The banks then flood the market with the money. Generally, this will weaken the Dollar or this money will directly be put to work in the stock market pushing it higher. What is the long term effect? Most of the wise investment community shudders at the long term results of this type of policy. On its basic level, it is another bubble in the making that will break at some point.

My projections:

In the short term, the Dollar is getting a little extended. I have the UUPresistance level at $23.50. This was hit today. Should the Dollar pull back, the markets may float higher in the next couple week, especially into Christmas and New Years. While a float higher is possible, I see it as choppy and wild with continued fear with an underlying upside bias as the Federal Reserve continues their propping.

Gareth Soloway

Chief Market Strategist

www.InTheMoneyStocks.com

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