Monday, February 27, 2012

02-27-2012 week ahead

This year so far reminds one of the start of 2011 when QE2 and excess liquidity by the FED was supporting stock prices.  The Fed claims there is no QE3, yet through interbank loans with the ECB they are supporting QE1 by the ECB - so we are seeing similar stock reaction.  So it seems to me there is QE3 by proxy by the ECB.  And this week we get additional QE (LTRO) from the ECB.  As with the FED (QE2 was less effective than QE1) one would expect ECB QE2  to be less effective than ECB QE1.  QE is the symptom of a problem, not a solution. 

Lat week we saw a new high on Monday (SPX) and then again on Friday.  I speculated Monday may be a high but lacked confidence (felt it may be later in the week or early this week).  With all the ECB liquidity flooding the world it supports higher equity prices so any pullback at this time is apt to be limited.  Still the market is over due a correction and it appears tops are in.  Here is the SPX:

GL traders.  If you used trailing stops for your long positions you should have had a good run.  It may be time to protect some of those gains.

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