Best of the Week
Most Popular
1.Election Forecast 2015 - Opinion Polls Trending Towards Conservative Outright Win - Nadeem_Walayat
2.UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - Nadeem_Walayat
3.Gold And Silver - When Will Precious Metals Rally? Not In 2015 - Michael_Noonan
4.Preparing for the Next Stocks Bear Market - Forecast 2015-2016 - Gary_Savage
5.Is a Stock Market Crash Imminent? - David Eifrig
6.Gold Price Slumps as US Dollar Soars, What's Next? - Nadeem_Walayat
7.US Dollar Forex Pairs and Gold Chartology - Rambus_Chartology
8.Election Forecast 2015: The Day Labour Lost the General Election - Nadeem_Walayat
9.The ECB Should End QE Next Month - EconMatters
10.Silver Price Poised to Surge - Zeal_LLC
Last 5 days
Sheffield Hallam Election Battle 2015 - Lib Dems Go to War Whilst Labour Sleeps - 27th Mar 15
Gold Effect On Mining & Shale Wasteland - 27th Mar 15
How Stock Investors Should Play the 2016 Presidential Race - 26th Mar 15
MidEast Energy Alert: Why the Crisis in Yemen Could Get Ugly Very Fast - 26th Mar 15
Stock Market Downward Spiral of Dumbness - 26th Mar 15
The Monetary Approach Reigns Supreme - 26th Mar 15
Stock Market Large Gap Down, Despite the Algos' Push Back - 26th Mar 15
Crude Oil Surges, Gold price Spikes as Middle East Tensions Escalate - 26th Mar 15
The U.S. Housing Market Recovery Is Fabricated Optimism - 26th Mar 15
Why Yemen Is The Next Saudi-Iranian Battleground - 26th Mar 15
The Crude Oil Price Crash and China Economic Slow Down - 26th Mar 15
Global Financial Markets Are More Distorted Than Ever Before - 26th Mar 15
One More Stock Market Rally and Then a Huge Drop Expected - 26th Mar 15
Danger Will Robinson - Stock Market Crash Warning - 25th Mar 15
Learn the Basics of Corrective Elliott Waves - 25th Mar 15
Why CNBC Is Hazardous to Your Financial Health! - 25th Mar 15
Will Your Retirement Accounts Survive The Coming Tax Code "Revolution"? - 25th Mar 15
US Dollar - Americas Phoenix - 25th Mar 15
California’s Epic Drought: Only One Year of Water Left! - 25th Mar 15
What’s Wrong With Silver? - 25th Mar 15
SPX Futures Appear Weak. WTIC and Gold May Be at Max Retracement - 25th Mar 15
We’re at the Dawn of a “New Energy Age” - 25th Mar 15
A Very Weak U.S. Economic Recovery - 25th Mar 15
Zero UK CPI Inflation Rate Prompts Deflation Danger Propaganda For Fresh Money Printing - 25th Mar 15
Stock Market NYSE Hi-Lo Index Aggressive Sell Signal - 24th Mar 15
Palladium Commodity Price Forecast - 24th Mar 15
Bitcoin Price Gearing Up for a Fall - 24th Mar 15
Safety Deposit Boxes In UK Being Closed By ‏HSBC – Not Closing Gold Vaults - 24th Mar 15
Japan Short Term Gains And Long Term Disaster - 24th Mar 15
China's Fragile Evolution - 24th Mar 15
David Cameron Announces Resignation Even Before Being Re-elected, Handing Labour 6 Seats - 24th Mar 15
City of London's Ownership of American Colonies - 24th Mar 15
Stock Market Reversal May Have Begun - 24th Mar 15
Casey Gathers Top Gold Experts to Share Secrets for Making Money in Any Market - 24th Mar 15
Thoughts on The Current Crude Oil Market - 24th Mar 15
U.S. Economy Still on Life Support - What Your Governments Hiding From You... - 24th Mar 15
UK Election Forecast 2015 - Budget Bribes Fail, SNP Insurgency Catastrophe - Video - 24th Mar 15
Is Stock Market Minor Top Taking Hold? - 23rd Mar 15
Greece and EU Running Out of Time as Bank Runs Intensify - 23rd Mar 15
Stock Market Slightly Negative Expectations Following Last Week's Rally - 23rd Mar 15
This Rising Interest Rates Play Could Make You a Quick 55% - 23rd Mar 15
Platinum Commodity Price False Break Low - 23rd Mar 15
The Real Reason The American Dream is Unraveling - 23rd Mar 15
Election Forecast 2015 - Budget Bribes Fail to Impress Voters, Tory's Lose Seats in Opinion Polls - 23rd Mar 15
Silver Price Reliance During U.S. Dollar Rally - 23rd Mar 15
Gold Price Outlook Dramatic Improvement Following US Dollar Topping Action - 23rd Mar 15
Wall Street Doesn't Want You to Do This - 22nd Mar 15
The "Natural Interest Rate" Is Always Positive and Cannot Be Negative - 22nd Mar 15
Exploring The Gold Market: The Fed, The Charts. The COTS and GLD - 22nd Mar 15
Stocks Bull Market Continues - 22nd Mar 15
Gold And Silver - China's AIIB Spells U.s. Dollar Demise, Not Clear For Precious Metals - 22nd Mar 15
Cocoa Commodity Price Technical Outlook - 21st Mar 15
Yield Curve, Futures, Suggest No U.S. Interest Rate Hike Until December - 21st Mar 15
Three Iconic Stocks Are Poised for a Dive - 21st Mar 15
We're All Hedge Funds Now! - 21st Mar 15
Why Stock Market Seasonality May Be Critical in 2015 - 20th Mar 15
Yellen's Tiger Riding Dilemma Keeps Interest Rates Near Zero - 20th Mar 15
FOMC is boxed in, Gold and Silver - 20th Mar 15
Silver Price Poised to Surge - 20th Mar 15
Why Aren’t These Investors Worried About The Gold Price? - 20th Mar 15
Gold Price Downside $850/oz; Upside Jump to $2,000/oz on ‘Grexit’ - 20th Mar 15
Cheap Paper Money - Precious Metals Technical Outlook - 20th Mar 15
Best Cash ISA vs Budget 2015 Scrapping Tax on Savings Interest on First £1,000 - 20th Mar 15
GDXJ / Gold Ratio - 20th Mar 15
What the “Yellen Effect” Ultimately Means for Crude Oil - 20th Mar 15
Sharp Fall In USD Index And Its Implications - 20th Mar 15
UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - 19th Mar 15
How Many Shale Oil Plays Make Money At $37 Per Barrel? - 19th Mar 15
Gold Price Rises 2.1% – Fed Signals Loose Monetary Policies to Continue - 19th Mar 15
The Hottest Investment Opportunities in Tech Stocks Sector Right Now - 19th Mar 15
China's Deflationary Economic Bust and Beyond: Anne Stevenson-Yang Presentation - 19th Mar 15
T-Mobile CEO: "Sprint couldn't give away service...their network is completely dead" - 19th Mar 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy Still on Life Support

Markets, Economies, Central Banks - All Out of Power!

Stock-Markets / Financial Markets 2012 Jul 07, 2012 - 12:38 AM GMT

By: Sy_Harding

Stock-Markets

Best Financial Markets Analysis ArticleHaving topped out into corrections in March and April, most global markets rallied back some in June, fueled by hopes that June’s unusual schedule of promising events would provide rescues for the eurozone and the U.S. economy. As those events arrived, if one or two failed to produce results, the rally only paused momentarily as there were still remaining events that might produce results.


But now we’re out of promising events for a while.

June’s first hope was that Spain would receive its requested bailout loans for its banks and Spain would go away as a worry. Next was the scheduled election in Greece that might prevent it from exiting the euro-zone. Then the G-20 summit on June 19 was hoped to produce a big coordinated global stimulus effort, and the Fed’s FOMC meeting was anticipated to result in new QE3 stimulus efforts for the U.S. economy. That was closely followed by the EU summit meeting and hope that it would result in a promising plan to control the eurozone debt crisis. This week it was that the European Central Bank and the Bank of England would cut interest rates at their meetings.

Markets won some, lost some.

Spain did receive the bailout loans for its banks. But the market’s euphoria lasted less than a day before it was realized that Spain’s government debt crisis was worse than its banking crisis.

The G-20 summit produced nothing except an agreement to continue to monitor conditions. The Fed’s FOMC meeting produced only an extension of the current ‘operation twist’ (which was already failing to halt the economic slowdown).

However, it seemed to get a big win last week from the EU summit, a major agreement to allow European banks to borrow directly from the established rescue programs, for the bailout funds to be used to buy the bonds of individual countries having difficulty selling their bonds to investors, and giving the European Central Bank more control over the rescue funds.

Unfortunately, the excitement over the agreement was short-lived when it was realized that much of the promised action would be delayed until the details are worked out later in the year.

But both the Bank of England and the European Central Bank came through with the hoped for interest rate cuts on Thursday. The Bank of England even included a degree of QE3 stimulus by adding to its bond-buying program. And China’s central bank chimed in with an unexpected rate cut of its own.    

Unfortunately, markets had apparently already factored those central bank actions into prices since they declined on the news, apparently also concerned about the next event, Friday’s U.S. monthly employment report.

And that jobs report was a disappointment. Only 80,000 new jobs were created in June. New jobs therefore averaged only 75,000 a month in the 2nd quarter, down  a big 66% from the average of 226,000 in the first quarter. That’s on top of all the other economic reports showing the 2nd quarter to have been much worse than the 1st quarter.

So the economy continues to run out of steam at a worsening pace.

The lack of positive response to the further monetary easing by central banks, and the biggest effort yet from the EU summit to contain the euro-zone debt crisis, indicates that central banks have also run out of firepower.

Can markets be far behind?

Consider also that ultimately stock prices are driven by corporate earnings, and Thomson/Reuters reported this week that warnings from corporations that their 2nd quarter earnings will not meet estimates are at the highest level in ten years.  

Bullish analysts are confident the dismal jobs report will force the Federal Reserve to rush in with the additional QE3 type of stimulus program they failed to produce at their FOMC meeting two weeks ago.

But the Fed was already reluctant to try to come to the rescue. In testimony before Congress Fed Chairman Bernanke denied that it was because the Fed has run out of ammunition, even though the positive effect of QE2 in 2010, and ‘operation twist’ last year, each lasted only six months before the economy ran into trouble again.

Now it faces the fact that the additional monetary easing by central banks in Europe on Thursday seems to have had no effect in reassuring markets, at least so far, with markets down two days in a row after the actions. That may have the Fed even more reluctant to follow with similar action. After all, if the Fed fires off what ammunition it may have left and it fizzles, what if more is needed down the road? It may be better to wait and keep markets hoping they still have something left for down the road “if needed”.

My forecast at the beginning of the year was for the market to top out in April into a tradable summer correction, and then launch into a substantial rally in the market’s favorable season beginning in the October/November time-frame.

I could be wrong. But so far, short-term rally attempts notwithstanding, it seems to be working out that way. June’s rally is beginning to look like a rally to be sold into, another opportunity for short-selling and profits from downside positioning in inverse etf’s.

Stay tuned!

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2012 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014