Markets turn on taper assumptions ahead of Fed meeting

Overview and Observation:

Friday the 13th failed to scare anyone beyond the already entrenched fear of a bloated equity market and concern over the confrontational attitudes of China and North Korea. Concern over Middle East sensitivities also are a factor in global angst.

The other of my concerns is the expansion of the Bitcoin program where someone bought a Lamborghini with those coins. With no intrinsic value other than the metals they are stamped in I see a "financial debacle" in the offing. The beginning of the year saw the value of one coin around $13 now around $1,000. Bear in mind the old axiom…."what goes up must come down" or even "if it seems too good to be true….it probably is. The "virtual" currency could result in real financial loss.

Now for some actual information for my clients and readers…….

Interest Rates:

March U.S. Treasury 30-year bonds (CBOT:ZBH14) closed Friday at 129 20/32nds, up 11/32nds. Economic data provided the idea of steady U.S. domestic inflation and the necessity for additional monetary stimulus. The U.S. Labor Department index on producer prices declined because of falling energy prices. The PPI was down 0.1% in November against analyst prediction for an unchanged index number. With the back and forth economist expectations as to the Federal Reserve’s intentions at the Dec. 17-18 meeting, we are on the sidelines for now.

Stock Indexes:

The Dow Jones Industrial Average closed at 15,755.36, up 15.93 but for the week lost 1.65%. Weakness in equities during the week was based on the assumption that the U.S. Federal Reserve would start considering tapering its stimulus program at the Dec. 17-18 meeting. The S&P 500 (CME:SPH14) closed at 1,775.32, down .18 and for the week lost 1.65% as well. The tech heavy Nasdaq closed at 4,000.98, up 2.57 and for the week lost 1.51%. Markets are awaiting the Federal Open Market Committee meeting to formulate trading ideas going forth. We remain bearish on the basis of our simply stated admonition that there is no such thing as a "jobless recovery."


The March U.S. Dollar Index (NYBOT:DXH14) closed Friday at 80.35, down 3 ticks as traders await the FOMC meeting this coming week. Friday’s data showed a decline in U.S. wholesale prices in November, its third consecutive decline. Thursday the House of Representatives passed a bipartisan budget bill that should avert another government shutdown in January. We are awaiting the Senate vote. The March Euro closed at $1.3738, down 5, the Swiss Franc down 6 at $1.1247, the Japanese yen 96.96, up 7, the British Pound down 48 at $1.6288, the Canadian dollar up 41, at 9417 and the Australian dollar up 22 at 8903. We continue to favor the U.S. dollar because at some point interest rates will be moving higher and that will attract dollar investment.

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