This week was quite interesting with lots of news such as elections, the
Federal Reserve meeting and employment numbers. Clearly any one of these items can move the stock market in a big way. The most interesting news of the week was the Federal Reserve stated intention to buy back yet more bonds. The idea behind this is to “artificially” force down interest rates to lower the value of the dollar and so improve our export market. This in turn would spur investment as our factories increase manufacturing and so start hiring people. It is already very clear with the low interest rates that almost all
commodities are increasing in price and have been for some time. Currently these increased commodity prices are not being seen at the retail level but it is only a matter of time before it affects you and I. This bond purchase program is a wonderful idea to stave off
deflation but is also a very risky idea on a number of fronts. The inflationary nature of this tactic can sometimes be hard to control. We have to hope that as
inflation starts picking up the Fed will be able to control it. The Fed by creating yet another bubble (housing and now bonds) does not inspire people with confidence down the road. The other issue is that as the dollar starts sinking due to lower interest rates the other world currencies all things being equal will go up in value on a relative basis. This will not be welcomed by the foreign powers and could start a currency war.
However this is all in the future and we can speculate forever. As investors all we care about is price and volume. After 2-3 weeks of market consolidation the stock indexes have broken out into new high ground on increased volume suggesting accumulation. This bodes well for the stock market but of course does not guarantee a continued bull market. Clearly odds favor more accumulation of stocks going forward and until we see a downturn on increased volume then the order of the day is still to accumulate stock.
The chart below of Dow Jones Industrial Average shows quite nicely the recent breakout and accompanied high volume, courtesy of
http://www.bigcharts.com/
Here are a few more stocks performing well and looking ready to move higher if the stock market holds up. Make sure as always that earnings are not imminent for any new purchases. Remember this blog site is not a newsletter that promotes stock tips or penny stocks. Rather the idea is to teach stock selection with low risk advice.
LULU - $48.15
EXLS - $20.29
LFT - $41.84
AFSI - $16.50
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