Treasuries, stocks and commodities from soybeans to silver staged big breakouts after the Federal Reserve announced plans to buy $300 billion in Treasuries and $750 billion in mortgage-backed securities. April gold futures surged above $950 an ounce and crude oil rallied above $50 a barrel.
MF Global Research Analyst Nick Kalivas said the Fed’s actions have been viewed as inflationary and a reason to own hard assets.
“Right or wrong, global monetary policy is giving fuel to the gold market. The capital flow into commodities is a risk to the global economic recovery. The world needs low commodity prices in line with weak demand, not an investment flow into commodities, which will raise the cost of production and make goods and services more expensive,” he said.“If the commodity markets continue to rally, the movement by the central banks may be self defeating.”
Economist Dennis Garman, editor of the popular Gartman Letter, said the Fed “has signaled that it shall err openly and consistently upon the side of inflation rather than deflation. This sets the tone for how we shall trade commodities henceforth; bullishly and almost universally so.”
While commodities continue to surge, Lind Plus Senior Market Strategist Jeff Friedman said the stock market may be getting “overcooked” and he recommends day traders sell against resistance as participants look to take some profits. The June S&P futures have seen seven consecutive days of higher highs and six of eight consecutive days of higher lows. Friedman said resistance for the June S&P futures is seen near an upside gap at 816. Support comes in at 734, and a close under the 10-day moving average at 72 would change outlook to more bearish. June S&P futures were last down 1.40 at 790.20.
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