US Equities - don't fight the FED

Posted by Graham Parlane on 16 January 2013

All

U.S equities are looking very strong in my opinion. And why not?

The FED have the monetary policy taps open and are pumping hard (at an increased rate in recent months with QE till 6.5% unemployed achieved), the Fed tells us that U.S companies are lean and mean (no excess staff, costs cut back to a minimum and sitting on huge piles of cash) and with no yield available anywhere investors are being pushed back into shares.

And this is the kicker, the FED wants asset prices higher! If stocks (and houses) appreciate then the debt burden (which created the GFC) dissipates i.e. they inflate their way out of trouble.

Today the Dow Jones Transports Index rose to ALL TIME HIGHS ! The transport index is seen as an advance indicator because transport companies move goods around before the sales of those goods are recorded in official figures. Thus their share prices are highly sensitive to early swings in business cycles.

Fig 1 – Dow Jones Transports weekly chart back 10 years– Breaking to all-time highs, blue sky ahead.

DJTRAN.IZ – click here to view chart

Fig 2 – Dow Jones Index. Market tried lower first last night only to end higher within the context of an established uptrend.

DJI.I – click here to view chart

If you’re buying into this idea call me to tailor the position size to an appropriate risk on your account.

DON’T FIGHT THE FED.

G.

Tags: Broker, CFD trading, CFDs, Dow Jones Transports Index, Equities, FED, GFC, Housing, Stocks, USA