ES consolidated under its previous breakdown point 1214.75. Even though Fed announcement hyped the price back up from early low around 1201.75, ES still was unable to close above 1214.75.
Today 1206 will continue acting as an important level for the downside move. If this level can be held up during overnight trading, we could see a repeat of yesterday’s consolidation move. But today the volume will be lighter than yesterday due to Veteran’s Day.
The QE2 operation schedule is already published on the Fed web site. Tomorrow will be the first POMO day for QE2. The Fed is expecting to buy $6-8 billion of bonds, and some of that money — maybe a lot of it — will end up in the equity markets. Today’s price dip will attract many buyers.
But if we take a closer look at the schedule, you will feel that something is very wrong. In the next month — by December 9 — the Fed will use $105 billion for outright purchases of Treasury securities. There is a QE2 POMO virtually every trading day, and two on November 29.
We don’t know what is really going on. But none of the publicly-announced reasons for this enormous creation of new money make any sense. It will not do what the Fed is saying it will do. But it will cause massive harm to individuals and the U.S. economy. We hope the Fed knows something we don’t know. But what is it?
ESZ0 Daily chart
ESZ0 Intraday – 60-minute bars
