Overnight, the Nikkei lost almost 500 points, reaching a 26 year low. But, as was the case on Friday, U.S. equity markets did not fall as sharply at today's open. We'll see a stream of economic reports this week and The Fed's FOMC is meeting Tuesday and Wednesday... their Policy Statement is scheduled for release at 11am on Wednesday. Most analysts expect a cut in the Fed Funds Rate of 50 basis points, but don't expect such a move to calm market volatility just yet.
It will take more time for the market to digest the impact of the government action we've seen this month, including the Troubled Asset Relief Program (TARP). The TARP was originally designed to buy troubled mortgage securities from financial institutions, but instead the first $250 billion is being invested (sunk) in bank preferred stock. Mr. Paulson determined that buying bank stock would be an easier and much faster way to get capital to them than trying to convince the banks to sell him their bad paper at pennies on the dollar. Now he's hoping the banks will use this capital to make loans to "Main Street". Time will tell if it was the right move. Looking pretty dismal so far as all the moves up are sold off by institutional investors. The Market Makers are showing their position.
Also, heads up on the dollar as we are about to hit some resistance on its raise to the top of the currency bucket. Also realize that the Yen is at a major resistance point on many currency fronts. Asia markets have lost half of their values this year. We are watching days where some markets are loosing 5% or more. This money is all flooding into dollars.
This international meeting will be a little rally hoax and expecting bigger declines.
Oil and gold will keep declining with this pressure.
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