Wednesday, October 7, 2015

The Fed is Out of Ammo… and Options..............

The Fed is Out of Ammo… and Options

In short, the economic data is a disaster, suggesting the US is entering if not already in a recession. Moreover, stocks have taken out critical support at the 50-week moving average.

Historically this has been THE line for bull markets. We sliced through it like a hot knife through butter last month. The market has done this twice in the last six years. Both times it was saved by a new Fed policy: QE 2 and Operation Twist, respectively.

However, this time around, the Fed's hands are tied by the fact that it is in the political cross hairs: ample research has shown that QE increases wealth inequality... and we're approaching a Presidential election in the US.

In short, the only thing holding the market up is hype and hope of more QE. But this is missing the point...

The bull market of the last six years is over.

Investors have begun to realize that Central Banks have lost control of the markets. This is why they erased months' worth of gains in four days' time.


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