US Stock Market A Fed “Sponsored Enterprise”
$DIA, $SPY, $QQQ, $VXX
James Bullard, St. Louis Federal Reserve President, says that “The Fed cannot permanently raise stock prices.”
TV punter Jim Cramer replied that Bullard “has been trying to raise rates for years now, even though the economy has obviously been too weak to do so.”
He takes issue with Mr. Bullard based on the fact that he, Mr. Cramer, has not liked this stock market, and he argues further that Main Street and housing will be hurt by higher rates.
Mr. Cramer insisted he is “not against a rate hike per se,” but for now he agrees with the IMF’s Christine Lagarde that the economy is too weak to do it (raise the fed funds rate) now.
He blasted the Fed for ignoring his call for lower rates in Y 2007 and insisted, “I am not a lunatic.”
The US Treasury and US Fed have gotten in so deep in boosting the stock market that the market has become a government-sponsored enterprise, likely to be bailed out by the Fed some time down the line.
Mr. Bullard says that the Fed has overshot on stimulus, “and that’s where you’re going to get into trouble.”
He called for a steeper rate of increase than the consensus on the FOMC and proceeded to defend it as better for the economy long-term.
Mr. Bullard supports legislation that would call on the Fed to explain to Congress what the basis of its monetary policy is and then report further when it deviates from its plan.
Implicit in what Mr. Bullard is saying is that because monetary policy works with a lag, if the Fed waits until there is overt evidence that inflation is getting out of control, it could be too late.
He said that if the Fed does not tighten now, it may have to tighten more severely later.
Meanwhile, about 75% of trading days have recently produced triple-digit moves for the day, often with much more ground covered intra-day with lower highs, lower lows and light volume.
DJIA -50.58 at 16279.89, NAS 100 -3.98 at 4752.74, S&P 500 -3.98 at 1938.76
Volume: trade Wednesday was on light side with fewer than 800-M/shares changing hands on the NYSE.
- NAS 100 +0.4% YTD
- Russell 2000 -5.3% YTD
- S&P 500 -5.8% YTD
- DJIA-8.7% YTD
| HeffX-LTN Analysis for DIA: | Overall | Short | Intermediate | Long |
| Bearish (-0.38) | Bearish (-0.48) | Bearish (-0.44) | Neutral (-0.22) |
| HeffX-LTN Analysis for SPY: | Overall | Short | Intermediate | Long |
| Very Bearish (-0.50) | Bearish (-0.41) | Very Bearish (-0.56) | Very Bearish (-0.53) |
| HeffX-LTN Analysis for QQQ: | Overall | Short | Intermediate | Long |
| Neutral (-0.17) | Neutral (0.00) | Bearish (-0.44) | Neutral (-0.08) |
| HeffX-LTN Analysis for VXX: | Overall | Short | Intermediate | Long |
| Neutral (0.09) | Neutral (-0.13) | Neutral (0.23) | Neutral (0.18) |
Stay tuned…
HeffX-LTN
Paul Ebeling
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