The markets surged today as Ben Bernanke testified on Capitol Hill. The reason for the monster surge in the markets was due to his preliminary comments on the possibility of QE3. As of today, QE3 is definitely a possibility. The Dollar tanked and the markets jumped higher. The SPDR S&P 500 ETF (NYSE:SPY) is trading at $133.20, +1.80 (+1.37%). The Dollar opened slightly lower and collapsed on his comments. The PowerShares DB US Dollar Index Bullish (NYSE:UUP) is trading at $21.43, -0.27 (-1.24%).
Notice how the Dollar has fallen the same amount as markets have risen. This tells us that in real terms, the markets have not gained at all. Instead, the markets have been revalued in real terms to the cheaper Dollar. In other words, in buying power, the average American has not gained in their portfolio today.
Bernanke is trying to control the markets. He was fully aware that his comments would sink the Dollar and rally the markets. It is all calculated. In addition, he is trying to help the Euro stabilize through this crisis. The world is all interconnected and a collapse in Europe would lead to a collapse in the United States. While in theory, manipulating the markets this way may be positive, especially in the short run, Bernanke is creating another bubble which will burst. Inevitably this bubble will be much bigger than the last with global catastrophic implications.
In the mean time, enjoy the volatile trading on this options expiration week. Swing trading is the only way to manage your 401k, IRA or investment accounts.
Gareth Soloway
InTheMoneyStocks.com
