Thursday, October 5th, 2017

Feds spark a market rally

 

Feds meeting today opened great chances for an early economic recovery. Feds announced to buy $1trillion in Treasuries and mortgage related debt to create an economic recovery by the end of 2009.

The Fed policy makers voted 10-0 to use all economic tools to revive the ailing economy. They aimed to keep interest rates low, so the consumers can jump start demand for homes and, cars and other goods, and so that credit starts flowing again  for an early recovery.

The Feds reasoned that with lower rates, and liquidity, consumers will be drawn to the market place and revive the economy which contracted 6.2% in the last quarter. The Fed rates were left unchanged as expected at 0%- 0.25%  without much surprise.

In addition to this, Feds also agreed to buy $750 billion in mortgage backed securities from Fannie Mae and Freddie Mac. This moves proves that Ben Bernanke has thrown the kitchen sink at the economy, and has left nothing unturned and pulled out all the stops. These are some very bold and aggressive actions taken by the Feds to date, to  combat Stock market crash of 2008.

On the other hand housing starts rose unexpectedly first time in 8 months in February 2009.  The housing starts shot up 22.2 % from January to 583,000 units according to Commerce Department. Building permits rose 3% to 547,000 units. This again sparked a rally in the stocks, and all major indexes scored solid gains from 3% to 4% on Tuesday.

With all these efforts being made along with the Obama Stimulus package for 787 billion passed by the Congress, and we have seen 8 days consecutive market gains in a very bullish rally , that still has some barriers to cross to have some legs. The indexes are all in the overbought range now.

SPX has hit 800 today and  turned back. The volumes were heavy and we just have to see if SPX will take out 800 and than penetrate its 50 day moving average as well, which has a downward slope, in the long term.

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Comments

8 Responses to “Feds spark a market rally”
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