Fed Keep Pumping Money into Risk

The markets are still rolling, much like the did the last time the Fed decided to print money and dump a bunch of it into the markets each week. This week they will buy Treasuries three times. They already bought $6.3 billion this morning and $4.7 billion last Friday. There will be two more purchases on Wednesday and Friday this week (POMO operations).

The goal of Bernanke is to inflate away the debt that is overhanging the markets. He gave a speech in 1999 where he discusses what monetary policies he would have used to get Japan out of its “lost decade”. There are now on their third “lost decade”. His goal is to give away money, print money and crash the Dollar to get Inflation.

In Bull Markets, whether induced my cheap money or by economic fundamentals, I like to buy leaders on pullbacks. It allows me to buy strength and manage risk.

The latest setup to trigger today was Baidu (BIDU) breaking out of a 17-day consolidation –



Last week there were breakouts in McDonalds (MCD), Oracle (ORCL), Consolidated Edison (ED), Linn Energy (LINE), Insurance (KIE), REITs (IYR) and the NASDAQ 100 (QQQQ). Analog Devices (ADI) and Barrick Gold (ABX) broke back below their breakout levels and stopped me out. I am still interested in them though.



Insurance (KIE) and REITS (IYR) sat around for three week before breaking out and are not both in narrow 4-day trading ranges as they consolidate the gains of last week.



Here is the daily chart of the S&P 500 (ES Z0-D). You can see that there is significant support right below here. If support is violated, then I will be on the lookout for a potentially larger correction. Otherwise, 127% of the April – July selloff is 1,264.



I think Financials are very important to the extension of the current move. If they can join in, then the rally continues to broaden out and get more bullish. But not everything is going to work. You can see that Financials (IYF) tried to break out last week and failed, falling almost 4% in two days. I am watching Financials closely. I will not buy anything extended, because there is simply too much risk here for a quick, sharp selloff.