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Certainty and Uncertainty

June 22, 2011 – 4:00 pm

The Fed is meeting this week and will announce their decision on what they plan on doing with interest hates. Everyone expects no change and no change in their statement when they announce their decision.

In reality they have made a statement by not renewing QE2 or rolling out some form of QE3. They appear to have taken a slightly tighter position by not continuing to buy treasuries. QE2 ends at the end of June meaning the government will cease buying treasuries thus no longer trying to hold interest rates down. It appears, for the time being, they will hold on to those treasuries they bought so they are not going to apply pressure to raise rates either which would happen if the government dumped the treasury on the market. The withdrawal of a buyer for government bonds may well mean interest rates will start to inch upward.

The stock market is well prepared as this effort and the end of the effort by the Fed is well known and anticipated so the traders and investors have made their plans with that in mind.

It is the unknown and uncertainty that the stock market hates. The reason the Greek issue was and is affecting the market is that there is uncertainty as to what they are going to do and what that will mean for other weak economic countries in the EU and the Euro.

The stock market hates uncertainty.

Good Trading
Steve Peasley

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