The Real Thing?

We don’t know, but we bought Coke (KO), another ride on Coach (COH), and sold Dolby (DLB). 

Read: The Real Thing? Market Shadows February 3 2013

Lee Adler of the Wall Street Examiner has a great track record of calling major moves in the stock market.

This week, Lee argued that the lower GDP reported for Q4 is incorrect, and that it will be revised upward. Moreover, the composite liquidity indicator rose last week, and there is money coursing through the financial systems veins – some of it will pool in the equity market.

Our investment thesis continues to be: The Federal Reserve is the largest driver of stock prices. Stocks as a group are less dependent on the health of the economy, or quarterly earnings, or world events, than they are on the actions of the U.S. Fed and other powerful central banks. Therefore, the lower GDP does not get translated into lower earnings and lower stock prices. In this world, a lower GDP supports more money printing by the Fed, a weaker dollar, and high stock and commodity prices. For more on how the Fed operates, read: Mistakes are for Repeating.

False GDP Report Gives Fed Excuse To Print, But Capital Inflows May Be Reversing

Courtesy of Lee Adler

The composite liquidity indicator rose last week as the Fed bought Treasuries and settled MBS purchases. The uptrend in market liquidity had been accelerating but it moderated last week as other components pulled back. This should be temporary as last week’s round of Fed purchase settlements sends cash coursing through the financial system and financial markets. That should show up in the data next week. Most of the lesser weighted components have had and should continue to have sympathetic upmoves as Fed cash flows through the system. Stocks should continue to oscillate along this upward wave. 

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Keep reading in: The Real Thing? Market Shadows February 3 2013

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