What Will Bernanke Do?

By: Guy Lerner | Tue, Aug 23, 2011
Print Email

For most market observers, all eyes and ears will be on Federal Reserve Chairman, Ben Bernanke, as he delivers a speech in Jackson Hole this Friday. We already know the Fed's intention to maintain a zero interest rate policy until 2013. The Fed's action is unprecedented and probably underscores the fact that they have little ammunition left in their arsenal beyond jawboning to stimulate the economy. At best, it is a symbolic gesture and one that tells me just how weak the economy is. Nonetheless, investors are searching for clues, and wondering what sort of magic Bernanke can pull out of his hat that would soothe the markets.

One place to search for clues as to the future of monetary policy is the Dollar Index. I have maintained that the Dollar is in a downtrend. (See article: "And the Answer Is...'). This isn't news but a fact. But as long as the down trend is manageable (i.e., isn't accelerating) the markets seem to be ok with this. But that could change and the Dollar could unravel if Bernanke pulls that rabbit out of his hat.

Figure 1 is a daily chart of the PowerShares DB US Dollar Bull (symbol: UUP). This is an ETF correlated to the movements in the Dollar Index. The red and black dots on the chart are key pivot points, which are the best areas of buying (support) and selling (resistance). So this is what I am watching. If the UUP closes below the key pivot at 20.92, then the Dollar is going lower, which means Bernanke, in all likelihood, has taken an extraordinary measure to soothe the markets and boost asset prices.

Figure 1. UUP/ daily
UUP/ daily

 


 

Guy Lerner

Author: Guy Lerner

Guy M. Lerner
http://thetechnicaltakedotcom.blogspot.com/

Disclaimer: Guy M. Lerner is the editor and founder of The Technical Take blog. His commentary on the financial markets is based upon information thought to be reliable and is not meant as investment advice. Under no circumstances does the information in his columns represent a recommendation to buy or sell stocks. Lerner may on occasion hold positions in the securities mentioned in his columns and on the Web site; in all instances, all positions are fully disclosed at http://thetechnicaltakedotcom.blogspot.com/. However, their positions may change at anytime. For more information on any of the above, please review The Technical Take's full Terms of Use and Privacy Policy (link below). While Lerner cannot provide investment advice or recommendations, he invites you to send your comments to: guy@thetechnicaltake.com.

Copyright Notice: Except for making one printed copy of this newsletter or any other materials, files or documents available from, accessible through or published by TheTechnicalTake, LLC for your personal use (or downloading for the same limited purpose), none of these said materials, files and/or documents may be reproduced, republished, rebroadcast or otherwise re-distributed without the prior expressed written permission of Guy M. Lerner.

Copyright © 2004-2012 Guy Lerner

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

SEARCH





TRUE MONEY SUPPLY

Source: The Contrarian Take http://blogs.forbes.com/michaelpollaro/
austrian-money-supply/