Saturday, June 20, 2015

The Color of (Cheap) Money

The Market Trend Model (data sheet) moved to a more positive bias on Friday when all of the price/time components of the indexes turned positive. The Nasdaq internals are confirming the move as the Nasdaq (chart) and the Russell 2000 (chart) lead the market to new all time highs. The Nasdaq-100 (chart) and the S&P 500 (chart) continue to lag behind.

Going into the weekend the market indexes endured some mild selling as fears of the long awaited "Grexit" gave traders an excuse to bank some profits.  With the Nasdaq ending the week at its all time closing high, it would appear a Greek default is not relevant to the U.S. stock market.  As I stated earlier in the week, "In my view this is really a non-event as this possibility has been on the horizon for many months, if not years.  At this point in the game any news relating to Greece is likely to be a non-event for the stock market indexes."

"Don't fight the Fed" remains the market mantra as central banks around the world continue to flood markets with "cheap money" policies.  Earlier this week Janet Yellen made it clear the U.S. Federal Reserve will continue to manipulate markets by keeping U.S. interest rates at historically low levels.

Barclays chief U.S. economist Michael Gapen best summed up U.S. Federal Reserve policy when he said, "The rate hike soon is the Fed's equivalent of free beer tomorrow. You come back into the bar the next day and it's still free beer tomorrow...it feeds the perception that the Fed really doesn't have a desire to move rates any time soon." See more of Gapen's comments here (article).

At the moment it appears the color of cheap money will continue to lift markets higher as the Federal Reserve keeps a tight lid on the case of "doom."


Moselle:  What you got in there?
Vincent Lauria:  In here?
[Opens case; smiles widely]
Vincent Lauria: Doom.