Friday, October 31, 2008

US Dollar Strength/Gains

Dollar gains against rival currencies Friday October 31, 12:06 pm ET by Ben Rooney, staff writer
The U.S. dollar rose against its main trading partners Friday as investors took shelter in lower-yielding currencies at the end of a volatile month in global financial markets. The euro fell 1.4% to trade at $1.2725 from %1.2923 late Thursday in New York. Britain's pound was down 1.5% at $1.6196 from $1.6039. The dollar was up against the yen at ¥99.02 from ¥98.25. The greenback fell to an overnight low of ¥96.72 but regained ground after the country's central bank cut a key interest rate. In a widely anticipated move, the Bank of Japan lowered its benchmark interest rate. But wary investors in Japan were expecting a more aggressive cut and Japan's Nikkei index fell 5% despite the news.

Central banks worldwide stepped up efforts this week to forestall a global recession. The Federal Reserve cut its key interest rate Wednesday to 1% from 1.5% and announced plans to extend currency swaps to a number of central banks in emerging markets. European stocks were higher in afternoon trading following a rocky start. In the United States, shares were also trading higher despite dour economic data.

A report from the Commerce Department showed Friday that consumer spending declined 0.3% in September. That followed data released Thursday showing the nation's economy shrank in the third quarter. Currency strategists say Friday's trade could be volatile as money managers seek to balance portfolios at the end of one of the most difficult months in Wall Street's history.
"With equity markets down 15-20% over the past month and today the last day of October, today could see some ghoulish month-end rebalancing flows, making the session difficult to handicap," said Steve Malyon, currency analyst at Scotia Capital in Toronto.

Wednesday, October 29, 2008

Steve Forbes - Fed Intentionally caused crises

Tuesday, October 28, 2008

FOMC Meeting - Rate Cut Expected

WASHINGTON (Reuters) – The U.S. Federal Reserve began a two-day meeting on Tuesday that is widely expected to lead to a cut in interest rates of at least a half-percentage point to calm a global credit crisis threatening the economy.
A Fed official said the gathering got underway at about 2 p.m. EDT. The policy-setting Federal Open Market Committee is expected to announce its decision around 2:15 p.m. EDT on Wednesday. Ten out of 14 big bond firms polled by Reuters forecast the U.S. central bank will opt to lower the overnight federal funds rate target a half point to 1 percent. That would be the lowest since June 2004 when the Fed was fighting a perceived risk of deflation, a danger some fear is about to re-emerge.

Financial futures markets were even more gloomy, implying a 44 percent likelihood the Fed would lower borrowing costs by a dramatic three quarters of a point, which would take them to territory not visited since July 1958. Some market participants think the Fed may be on the way to cutting rates all the way to zero, as Japan was forced to do to counter deflation in the 1990s. A more-forceful three-quarter point cut would be insurance against a deflation risk.
However, other analysts said the lack of a clear deflationary threat at this stage may lead the Fed to opt for the more-incremental half-point move. More at Reuters.

U.S. Consumer Confidence plunges

WASHINGTON -- Wounded by the financial crisis, U.S. consumer confidence plunged in October, reaching an all-time low in the series' 41-year existence, the Conference Board reported Tuesday.

Despite falling gasoline prices, the October consumer confidence index fell to 38 from an upwardly revised September reading of 61.4. Expectations turned "significantly more pessimistic," with the percentage of consumers expecting business conditions to worsen over the next six months rising to 36.6% from 21%, and those expecting fewer jobs rising to 41.5% from 26.9%.

"Their earnings outlook, as well as inflation outlook, is also more pessimistic, and this news does not bode well for retailers who are already bracing for what is shaping up to be a very challenging holiday season," said Lynn Franco, director of the Conference Board Consumer Research Center.

The present situation index fell to 41.9 from 61.1. The expectations index reached a record low in October, hitting 35.5, compared with 61.5 in the prior month.
The full story can be found @

Monday, October 27, 2008

The Holiday Effect - Stock Markets

Over the past century, there have been nine holidays during which the Exchanges have traditionally been closed. Historical research shows that stock prices often behave in a specific manner in each of the two trading days preceding these holidays. By becoming aware of this behavior, both short-term traders and longer-term investors can benefit.

The general strategy is to purchase equities one or two days prior to a holiday. Short-term traders would look to sell just after the holiday while longer-term investors would wait until year end. Both strategies have proven to be profitable plays. The theory behind this effect is that traders are lightening up their holdings (selling) prior to the three day holiday in order to avoid any unexpected bad news. The selling pressure drives stock prices down, making those days a good opportunity for buying lower in the range.
Here is the average pre-holiday results for the last 50 years, based on the S&P 500 Index:

Holiday / Buy 2 days before, Buy 1 day before and sell at year end

Independence Day / 13.3% / 37.3%
Labor Day / 16.8% / 33.7%
Election Day / 17.9% / 4.6%
Thanksgiving / 4.3% / 1.1%
Christmas / -7.1% / 15.2%
New Year's / 31.1% / 19.6%

My source for this is Stockcharts - Chart School. Do your own research. For specific stock picks/ideas feel free to contact me at Good luck and Happy Trading

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