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Balancing on the Fence

August 31, 2012 – 5:11 pm

Bernanke’s speech out of Jackson Hole this morning gave little for the market to celebrate as he provided no new hints as to any possible time frame of a new QE3 effort. This really should not be a surprise as the FED meets in a little over week and that is the place that these decisions should be made.

Even then I doubt that the FED will do anything unless the jobs report out next week is dismal. Everyone knows it is not going to be very strong but the FED, even if they won’t say it, does not want to be perceived as influencing the Presidential election. At least that has been the history of the FED. Still, if the jobs report is worse than expected QE3 would be back on the table. So far it is just talk, and no action on further easing. Operation Twist is still under way and will continue until year end. Maybe that is enough in the FED’s collective mind.

I think the FED is clearly close to doing something but hoping that they do not have to. They will be watching the economic statistics closely and without inflation being a problem they will act on any signs of further weakness. However, this week we saw signs of improvement not further deterioration in our economy.

Currently, the FED is fence sitting. When and which way they fall off the fence is yet to be determined.

Good Trading,
Steve Peasley

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