Friday, March 09, 2012

Does Strengthening Economy Take QE3 Off The Table?

The dollar is rallying this morning on the heels of a better than expected jobs report. The stock market is also nicely higher, and lo and behold the S&P 500 is right back at its highs from last week.

Nonfarm payrolls rose by 227,000, above expectations. Private payrolls also beat expectations and grew by 233,000. The unemployment rate remained steady at 8.3%. With increasing signs of an improving economy, one has to wonder what those calling for QE3 will have to hang their hat on after this?

Overnight news that Greece's debt swap was met with better than 80% participation may have helped Asian markets rally, but it has done little to help the euro this morning vs. the strong dollar. The euro ETF (FXE) is sitting right on its 50-day support.

Commodities were lower this morning, but most have since rallied. Gold prices are higher to $1710, oil prices are up to $106.70, and copper and silver prices are higher as well.

The 10-year yield is bouncing to 2.05%, but it is still in this multi-month trading range that has not been able to get above 2.10%. As for the VIX, it is plunging this morning down -7% to 16.67. I am surprised by the sharp drop in the VIX, but looking at the chart it looks possible that we could see new lows in the VIX if the market keeps rallying.

Trading comment: The SPX is right back at its highs for the year. I said earlier this week that after the 3-day decline we wanted to step in and do some buying. Even though I thought the correction wasn't over, I stated that just going by the action in the major indexes wasn't the best strategy over the last several months. You have to follow your stocks, and add to them when they are showing good setups. Waiting for the market to correct more sometimes can keep you from making good individual decisions. Also, Colorado had a big win last night vs. Oregon. They play again tonight in the semi-finals of the PAC-12 tourney here in LA. Go Buffs!


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