Daily Commentary by Larry Baer: As I mentioned in this week's edition of my
weekly newsletter "ViewPoint" - the run-up to Wednesday's release of the
minutes of the last Federal Open Market Committee's meeting (7/31 - 8/1) will
likely dominate this week's economic calendar.
There is little doubt the media talking heads
will try to create a lot of buzz about the imminent or not so imminent launch
of "QE3" from Fed Chairman Bernanke and his fellow central bankers.
While I understand the need to fill airtime in the fifteen minutes between
commercials -- I suspect all the chatter will prove to be much ado about
nothing. Most market participants are
keenly aware of the fact that if the Fed had a magic potion available to fix
our economic woes -- it would have already been deployed.
In my opinion, the lack of additional cash
injections into the economy from the Fed together with the stalemate in Washington
over taxes and spending is poised to take a substantial toll on the stock
markets. My models are flashing an
increasing number of signals suggesting the Dow is very vulnerable to a
profit-taking sell-off this week.
Without an obvious source of strength -- current valuations will be
increasingly hard to justify - and that is a condition almost sure to start
building a "take-the-money-and-run" thought process in the mind of
previously big and bold stock investors.
If my assessment proves accurate, the top of
the Dow's 11 week rally from the early June lows will be achieved in a range
between 13,245 and 13,400. The ensuing
sell-off in the stock markets, should it actually develop, will likely prove supportive
of the prospects for steady to fractionally lower mortgage interest rates in
the near-term. Don't jump-the-gun here
-- in my judgment it is imperative the Fannie Mae 3.0% 30-year mortgage-backed
security close above 102.375 before you choose to initiate an aggressive
"floating" loan position - even if the Dow happens to be selling-off
hard.
Be patient - be disciplined - and play it by
the numbers outlined above.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
