We love to fool ourselves in this market, don't we? Monday people were buying futures as they "awaited" statements from Federal Reserve Chairman Ben Bernanke from the central bankers conference in Jackson Hole, Wyo. They are hoping for good news that will ignite "growth" and promote stability. It was more hideous action -- a bear-market mauling.
Any post-Fed-meeting move will be just like the post-Merkel-Sarkozy period. Our problems are too deep right now to be solved by Fed chieftains.
These short-lived gains are classic bear-market rallies. Just look back at 1990, when a bear market ensued after the U.S. invaded Iraq.
Then people bought stocks, setting off a rally.
All the meetings ultimately failed and the market lost about 20%, with tech stocks and banks losing much more. The market didn't get its footing until the war was won.
I know what people reading this might be saying: "Wait, Jim, are you saying we are in a bear market? Wasn't that a horrible bear market?"
I think tech and banks will remain in terrible bear market mode right through this.
It’s going to be a long week with market observers deferring predictions until Fed Chairman Bernanke delivers his Jackson Hole speech on Friday. The meeting presents Ben Bernanke with the opportunity to expand upon the full array of policy tools referred to in the August 9 FOMC policy statement. U.S. Dollar – The dollar index weakened on the expectation that Mr. Bernanke will promise to repeat a 2010 pledge to do whatever it takes to boost the economy. The feeling that the Fed’s printing presses are running at high speed and the fear that inflation will once again gain traction are detracting from the appeal of the dollar, not to mention the lack of appeal from the perennial promise of a near-zero yield. The dollar’s malaise could worsen during the week in anticipation of a fresh Fed rescue package. Until Bernanke dismisses the prospect of further easing on Friday, the dollar is likely to remain on the defensive, and with the weight of expectation in favor of a third wave of easing, the dollar could be roiled this week.
Euro – The euro advanced from a low at $1.4350 to trade higher on the day reaching $1.4434 on hopes that U.S. – led stimulus would undermine the dollar. Strength for euro has surprised many in light of the political failure to stem the sovereign debt crisis.
Japanese yen – More disgruntlement emerged from the government and central bank officials over the weekend following Friday’s record-high for the yen against the dollar at ¥75.95. The dollar rose on Monday to buy ¥76.80. Aussie dollar – The Aussie rebounded from earlier weakness as global stock markets advanced with hopes running high for a fresh look at quantitative easing at Friday’s Jackson Hole symposium. The unit recently traded at $1.0469 against the dollar and ¥80.14 against the Japanese unit.
Canadian dollar – The response to early conviction over what Fed Chief Bernanke will do and say was to rally support for the Canadian unit on Monday.