25 June 2008 - 16:35Market Commentary 6/25/08

Big surprise, the fed decided to leave rates unchanged. In their statement the fed pointed to higher retail sales as evidence of health in the economy. However this is not significant when you realize that these figures count the sales from gas stations and groceries. It is appalling to me that they did not raise rates because of the inflation that is occurring due to the weak dollar and artificially low interest rates in large part. On the other hand they know just how close the entire financial system is to falling flat on it’s face so they dare not hike rates. After all if you were a struggling bank (which is what the Fed is comprised of) and you had to choose between cheap loans to yourself and higher inflation I am sure you would pick the loans too. Obviously we are entering a period of stagflation in the United States which will probably make the late 1970s look like a walk in the park.  Especially considering that we still have a war going on and government contractors taking the taxpayer to the cleaners. A war that the pea brains in Washington want to expand further by attacking Iran. needless to say with the Fed letting us down and our politicians doing the same I am still bearish on the dollar. The stock market bounced after traveling within 15 points of the March low and was looking desperately for a rate cut from the fed to save it. The 200 day moving average comes in at 11709 on the weekly chart as well so it is a level the market will respect the pattern completion and moving average for a while. It may even attempt a feeble rally before it plummets based solely on technical trading.