Thursday, October 27, 2011

Behind the 339 Point Gain in the Dow; Transportation Index Climb for Month Greatest Since 1939

With it clear the EuroZone will support most of its banks and government debt (except for Greece), markets around the globe rocketed today, including in US markets, where the EZ deal acted as a catalyst to rocket the huge amounts of money that Fed chairman Bernanke has been printing.

EPJ Daily Alert readers were not surprised by the action. Exactly three weeks ago, on October 6, I wrote:
The specifics of the EZ rescue are still in the making, but from what I picked up on the sidelines of the World Ideas Forum (where Geithner spoke), it will probably result in Greece going into a controlled default, while the other PIIGS are protected by a firewall, whereby all the liabilities of other PIIGS banks will be guaranteed by some European entity.

We are likely very close to the end of the short-term trade of buying weakness and selling into strength, for short-term traders. More than likely we are headed into a period of very strong markets.

For short-term and medium-term traders, this is the time to load up on commodities. I expect very strong upside activity, now that the EZ appears to be very close to joining the money printing brigade.
All other indices climbed with the Dow.

The S&P 500 jumped 3.4 percent to 1,284.61 at 4 p.m., sending its October gain to 14 percent and erasing its 2011 loss. The 20 percent monthly advance for the Dow Jones Transportation Average, a proxy for the economy, is the biggest since 1939.

The S&P GSCI index of 24 commodities gained 3 percent, the most in a month, led by metals and oil. Nickel jumped 4.1 percent and copper rose 6.1 percent to close at $8,145 a metric ton ($3.69 a pound) in London and is up 14 percent this week, a record in Bloomberg data starting in 1986.

December gold futures increased 1.4 percent to $1,747.70 an ounce. Oil advanced to the highest level in almost three months, climbing 4.2 percent to settle at $93.96 a barrel.

There will always be pullbacks, but as long as mad man Bernanke continues to print money at near record rates, the upward trend will continue in both the stock market and economy. The next big surprise will be the price inflation. We are headed for double digit inflation at both the producer level and consumer level. Brace yourselves.