MLR - PMP 12/16/13
Major averages finished near breakeven in lower trade as the markets await the Fed's upcoming two-day meeting that starts on Tuesday and ends with the policy announcement on Wednesdays. Rumors on tapering have been numerous this year with the Fed first saying they would taper before the end of the year, then reversing their position. Some members even said that no tapering should start until unemployment is not at but BELOW 6.5% since signs of recovery are faint at best. Our view is that the Fed likely won't engage in any tapering on Wednesday as this is Fed Chairman Ben Bernanke's final meeting before departing office, particularly given the negative PPI data that came out next week. And if any tapering were forthcoming, it has likely already been discounted by the market.
The CRB (Commodity Research Bureau) Index has been in a downtrend since 2011 so despite all the money printing, hard assets have yet to trend higher. This is because central banks are reacting to the situation by printing money rather than being proactive. Global recession and issues within China have slowed China's growth thus its demand on commodities has slowed. Meanwhile, new mines and new mining technologies have increased supply.
And the more money that is printed, the deeper the hole, and the further down the road the can gets kicked. But at some point, the "day of reckoning" will occur which may occur in the form of a major top. When and how this occurs is anyone's guess, but it is paramount to watch price/volume action as always. To be sure, with all central banks printing money, a changing of the guard is due to occur sometime in the future where creditor nations benefit and debtor nations suffer since you can't create wealth by simply printing money. Quantitative easing simply buys these countries time. The average life expectancy of a fiat currency is 42 years based on the last several hundred years of history.
Futures are up strongly this morning on strong European economic data after tanking sharply last night on weak Asian data. A number of leading stocks have been pulling back or correcting recently as the indexes have peeled off of their recent peaks. Investors should keep an eye out for pocket pivot buy points to emerge in leading stocks as they find support up through or off of logical areas, such as the 10-day or 50-day moving average or the tops of prior bases.
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