Bernanke "Promotes" Recovery

Markets were right on cue today, as the Dow ended up triple digits again to open up the new week. Increasing energy and gold prices helped to lift markets, as well as some help from the Fed chairman. Bernanke addressed the economy today and discussed some of his outlook on the economy and some of the worries of investors. First of all, it looks like Bernanke will not be touching interest rates, until he sees a bit of a recovery in the employment sector. That could be well into 2010 or even 2011.

On the subject of the falling dollar, he did not seem to worried. He said that efforts of "promoting the recovery" would help in bringing back value to the dollar. Promote the recovery? Are we going to start seeing commercials about how we are recovering, so buy the dollar? In fact, I believe that has been the overall plan of the Fed in regards to all aspects of the company. Promote a recession is over. It is true that a big reason recessions linger and sink even deeper is because of the change of sentiment that comes to consumers. Once lending becomes tighter and business begins to fall, consumers feel they need to tighten up that budget and bunker up for the long haul. Such habits are good practices, but have a very adverse effect during a downward economy.

This time around, the government has been promoting that the storm has passed and that its OK to start spending again, in hopes that the consumer can help pull us out. Unfortunately, we have not been so easily convinced as retail sales continue to trail down (Pac Sun announced horrible earnings today after the close). However, it has been able to get markets at a much more attractive level for businesses, and banks have made a lot of money in the stock market (since they seem to be the only players right now). However, how sustainable is this recovery?

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We are now reaching the point of a 50% re-tracement from recent lows as well as a 50% re-tracement in time from the previous high to low. Such would indicate the beginning of a new leg down, but recently technicals have been non significant. It is obvious that the Fed is hoping to combat deflation with continuing inflationary decisions. The big move in gold and energy, is a bit soon in my opinion and I believe they are in risk of a downfall. I do believe gold will run a bit longer, as foreign nations are buying it like candy, but it could have a very swift reversal.

As for now, I am waiting it out a bit, and considering a few tech options, as I feel they are holding up the best for the time being. Energy and gold are getting at new record levels and are becoming a bit too high for me to consider a wise investment. This should be a very interesting year end. Happy Trading.



    Ben should become a chief.

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