Today, the stock market rallied again on very dismal job readings. It could be due to the dollar weakness that has sparked this rally. However, it seems that investors want more and more bad news so that they can confirm that the FED will do the quantitative easing.
However, does QE works?
The idea behind QE is that the FED buys bonds, freeing banks from their balance sheet and providing them more money to lend. However the truth is that no one wants to borrow no matter how low the interest rates are as the economy is really bad.
The best form of government aid would be an actual stimulus package, such as tax breaks to corporations, subsidies.. Another construction package. Further boosting the railway plan. These form of stimulus works best.
Currently, QE only helps to inflate the market. That’s just it. The underlying economy is not doing well. Demand for goods may dampen.
This is just a scary thought. Inflated market crash quite easily. Stay away from new long positions now is the safest option. Buy again when the market is at the other extreme. This might be the last phase of EUPHORIA.
I just got a feeling that this pump will not end well.
NFP showed a negative 95k vs expectation of 1k. This is really bad. Look at all the previous post NFP trend. Everytime NFP fails expectations, the market tend to drop for 3 days.
1 comment:
What 3-days? 3-days market except weekend? Pls. I need clarification on this.
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