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MLR - Premarket Pulse August 16, 2012


Continued quiet trade has been the recent theme in the markets. Positive economic news, continued QE, August vacations, and the wait ahead of the upcoming FED/ECB announcement are the reasons for the muted, though slightly bullish action. The Fed has its summit in Jackson Hole, Wyoming at the end of this month, followed by a Sept. 12-13 policy meeting. The Fed could announce QE3 after its policy meeting, but economic reports have been recently positive. The stronger the economy, the lower the odds of QE3. That said, the US economy overall continues to show very slow progress and the UK and much of Europe is mired in recession.

As further evidence of economic malaise, Cisco Systems (CSCO) stock rose 5% after hours after the network-equipment giant posted solid first-quarter results and unveiled a plan to raise its quarterly dividend by 75%, but it did state that it expects Europe to be very challenging to its business over the next several quarters. However, CEO John Chambers noted that in Q4 company has seen improvement but is not yet ready to call it a trend pending results in the upcoming fiscal Q1.

Meanwhile, investors may be conditioned to the whip-saw action we've seen in the "bull" summer of 2012 and in this sense the crowd could be set up to be fooled if the market does not retrace back down off of its current higher-highs as has been the case at every other peak. Technically, the one difference at this most recent price peak in the indexes has been their ability to try and consolidated recent gains, and this could be a clue of further highs to come. Fed heads are now hinting that the Fed would be willing to allow for a higher inflation target rate that is great than 2% in order to get the economy moving again, all of which could be bullish for gold, commodities, and stocks.

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