Just to show how slow the economy is recovering, the federal reserve announced on Thursday the release of QE3 (quantitative easing three). Under QE3 the government will purchase up to 40 billion dollars of mortgage backed securities per month
I want to focus on how the overall market and some specific commodity related assets have already appreciated this year to date. Below is a chart of the S&P 500 (SPY).
I want to focus on how the overall market and some specific commodity related assets have already appreciated this year to date. Below is a chart of the S&P 500 (SPY).
This ETF is already up 18% for the year. This chart has the look of some extreme front running the QE3 announcement. The chart is extremely over bought on the daily chart.
The chart above is the price of oil / barrel. Notice that this is the highest price per barrel at 96.25 that a QE program has been initiated.
Above is a chart of food commodities which include soybeans up 44% year to date, wheat up 41%, and corn up 21%. Perhaps more QE front running has occurred within this soft commodity sector as well.
Bottom Line: Just about all markets have been priced extremely high. If this was a telegraphed call that many traders have made in front of the QE announcement, than we should get a good pullback from today's prices. The stock market and some commodity sectors are being priced at extremely high risk levels. Thank you for reading.
