Markets: The Truth Revealed
The markets opened sharply higher. The key to the markets higher open was a crushing of the Dollar that took place overnight. The PowerShares DB US Dollar Index Bullish (NYSE:UUP) is trading at $21.53, -0.14 (-0.65%), making a new 52 week low. A weaker Dollar is positive for the markets as stocks are treated like commodities in regards to Dollar fluctuations. A drop in the Dollar means individual companies must be valued higher in terms of Dollars just like a drop in the Dollar means gold must be valued higher in terms of the greenback. Black box trading programs are programmed this way. Until those programs are changed, expect the same going forward.
The SPDR S&P 500 ETF (NYSE:SPY) pushed to a high of $133.99 in the first ten minutes of the trading day before collapsing lower. This level happened to be a perfect triple top from the last two trading days and a major sticking point of resistance. The sharp fall in the markets can be blamed on the technical resistance points as well as a continue push in oil. Spot crude is nearing $112.00 per barrel and showing no signs of slowing. The United States Oil Fund LP (NYSE:USO) is trading at $44.53, +0.54 (+1.23%). Silver and gold are both spiking higher again, making new 52 week highs. As volume lightens up this afternoon, look for the markets to start to float sideways, possibly even slightly higher.
With commodity prices soaring, there is just one group to blame, the Federal Reserve. Their weak Dollar, print money policy is the culprit. By flooding the world with tons of new Dollars, the Dollars value declines. As the value of the Dollar declines, commodity prices must rise. This effect was obvious from the very start but did little to deter Ben Bernanke and his minions. As commodity prices have soared, the middle class is fading. Articles have been written that to survive as the middle class, many have to work two jobs. As energy and food continue higher, the middle class is finding themselves to be no more. The poor in this country, those that could barely afford to buy food to feed their family are relying on food stamps. As prices rise, this is not even enough to help them get by.
The Federal Reserve has said food and energy do not count when looking at inflation. That is probably the biggest joke ever spoken. What is the largest percentage of income spent on by the average American family? After housing, food and energy. In this simple Chief Market Strategists view, food and energy should be the main keys to monitoring inflation.
The bottom line is this, two years ago I spoke of the repercussions of a print money policy. I discussed how energy and food would rip higher and the average American, with few jobs and slow wage growth would get crushed. This is happening and will continue to happen as long as the Federal Reserve continues to print money and the Dollar goes down. I believe the Federal Reserve to be decently intelligent, therefore I must conclude they knew this would happen. That leaves me with one final thought, they wanted this to be the outcome. Was this all planned? Are they attempting to create two classes, rich and poor? Time will tell but without wage growth and jobs, the hardships are just starting as oil heads north of $112.00 per barrel.