Stocks Make a Massive Move, but Volume Fails to Keep Up

Filed Under Market Commentary | Leave a Comment

The largest percantage gains always occur during Bear Markets.

On the back of the new plan from Treasuries to loan as much as $1 Trillion dollars to private investors helped stocks advance higher. The plan will allow private investors borrow money from the US Treasury at favorable rates to buy toxic (not legacy) assets, which under no other circumstance have any value in an auction. This plan is in addition to the Federal Reserves plan to use as much as $1.2 Trillion dollars to buy back US Treasury debt (monetizing debt) and toxic assets. Banks soared on the news that they may find relief by having these assets moved off their balance sheet and receive dollars. Unfortunately, leading stock indicators such as the IBD 100 failed to impress and severly lagged the overall market. In addition, volume did not come into the market suggesting the move was not being supported by large institutional money. If this move should last it will need better leaders and better volume, but it is unlikely we’ll get our new bull market this confirmed rally.

Simply printing money and taking out more debt to pay for these toxic assets will not solve the problem. The problem was excessive credit and expansion of the money supply. For far too long the Federal Reserve Bank has kept rates artificially low and the money supply on an upswing. In a matter of one week we have seen plans to increase the monetary base by ANOTHER $2 TRILLION dollars. This makes the Weimar Republic look like childs play. China is about to announce plans to create a one world currency, dumping the dollar as the world’s reserve currency. If this were to occur, confidence in the dollar will be lost and forced liquidation of dollar positions will take place. Foreigners will yank all US dollar based assets in favor of either the new world currency or precious metals leaving the dollar near worthless. This crisis will lead to explosive inflation and foreigners will sell US stocks they hold. We need to stop printing money, take our medicine and return to sound money. That is the recipe for the United States to return to prosperity (spending needs to be cut as well as entitlement programs).

Be very wary of this market and do not trust it for one minute unless we see new leadership forming. Having former leaders lifting the market always leads to disaster.

Market Speculator