Financials and Small Caps Rise Ahead Of September FOMC Meeting 2012 On QE3 Expectations, German Court Ratifies EFSF:
The sectors we are watching carefully moved up as traders await news from the Fed on QE3 at the September 2012 meeting. Fed Chairman Ben Bernanke will let market participants know more tomorrow and some traders moved in anticipation today although the major averages seemed to move sideways. The Dow ended the day at 13,333 up 9.99 or .07 percent. Volatility remains at low levels and a slight increase would not yet be associated with a falling market. The Fed may extend the time horizon for keeping interest rates low but that might not be enough for markets as expectations from economists of QE3 are at the highest levels in several weeks according to analysis we’ve seen.
The financial sector ETF jumped in the early part of the session today and hit a new monthly high not seen since early April 2012. The German court agreed to ratify the European Financial Stability Facility (EFSF) bailout fund which increased predictions in the short run that the EU would stay in tact after 3 years of a prolonged debt crisis and helped lift the XLF.
The small cap exchange traded fund quietly passed levels not seen since July 2011 which keeps us bullish in the short run and Apple pulled out a nearly 2 percent gain for today after announcing the new iPhone 5. We would not be fighting the Fed (as usual) and equities may catch a strong bid if Ben Bernanke delivers in Draghi-like fashion. No Fed Reserve Bank officials have been on the circuit lately which may mean an upside surprise is possible but we have no probability percentage to place on this forecast.