This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

QE Fatigue Plagues Transports, May Be Contagious

NEW YORK ( TheStreet) -- It seems like the Federal Reserve is all in with QE3 as this version of money printing is open-ended -- $40 billion a month of purchases of mortgage-backed securities as far as the eye can see. After big gains in gold, crude oil and equities last Thursday and Friday, the U.S. capital markets are feeling what I will call the early stages of "QE Fatigue."

U.S. Treasury yields rose last week after QE3 was announced with the yield on the U.S. Treasury 10-year note rising to 1.894% last Friday. The yield on the U.S. Treasury 30-year bond rose to 3.118% on Monday, which made equities less undervalued and more overvalued.

Comex gold traded as high as $1781.80 on Wednesday shy of my quarterly risky level at $1805.90, after the euro versus the dollar tested 1.3171 on Monday.

Meanwhile, Nymex crude oil traded above $100 per barrel to $100.42 last Friday then by Wednesday was below my monthly value level, now a pivot at $93.30, as weak demand and a huge rise in inventories trumped QE3 speculation and continued Mid-East tensions. My monthly value level became a pivot and was tested pre-market this morning after Thursday's low at $90.66.

In the equity markets, Dow Industrials, S&P 500 and the Nasdaq set new multi-year highs on Friday with the Russell 2000 only .07 away from testing its all time high at 868.57, which was set in May 2011.

Dow Transports traded up into last Friday then reality set in this week. Earnings warnings from FedEx (FDX - Get Report) and Norfolk Southern (NSC - Get Report) pushed transports back below its 50-day and 200-day simple moving averages. Transports clearly caught "QE Fatigue" upon the realization that the U.S. economy was weakening and that QE3 may not be the correct prescription. Next week we will find out how contagious QE Fatigue becomes.

Higher stock prices and the higher 30-year bond yield made stocks less undervalued and more overvalued. On Monday www.ValueEngine.com showed that 45.7% of all stocks were undervalued versus 81.0% at the June 4 market low. Fifteen of 16 sectors became overvalued; Utilities by 18.5%, Retail-Wholesale by 15.7%, Finance by 15.6%, Medical by 14.9%, Consumer Staples by 14.5%, Construction by 12.5%, and Computer and Technology 11.9%. I covered four of these sectors in my stories this week.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
FDX $173.22 -1.07%
NSC $92.00 -1.82%
AAPL $130.28 -1.14%
FB $79.19 -1.19%
GOOG $532.11 -1.42%

Markets

DOW 18,010.68 -115.44 -0.64%
S&P 500 2,107.39 -13.40 -0.63%
NASDAQ 5,070.0260 -27.95 -0.55%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs