Dave's Daily By Dave Fry, founder and publisher of ETF Digest and author of the best-selling book Create Your Own ETF Hedge Fund. March 8, 2010 FED READIES TIGHTENING? Monday was quiet and featureless. There was an interesting press release from the Fed that investors haven't quite yet absorbed or reacted to. It's the second time in six months the Fed has discussed tightening in an oblique manner. Fed open market operations can drain liquidity from the system using "reverse repos". Like many have stated, including us, is when the punchbowl (easy money) is removed from the system, the driving force for bulls would be removed from the market. Continue to Major U.S. Markets
Markets are overbought and feel a little "heavy". The little discussed danger for bulls lies in the potential for the Fed to start removing the punchbowl by draining liquidity. This would be an open market operation on their part that is little different than other tightening tools like raising the Fed Funds rate. Tuesday Cisco will announce a new technology that they say will alter technology. This is what American tech companies do best--innovate. Let's see what happens. You can follow our pithy comments on twitter and become a fan of ETF Digest on facebook. Disclaimer: Among other issues the ETF Digest maintains positions in: MDY, MVV, IWM, TNA, QLD, XLY, XLI, KRE, UUP, DGP, UCO and XPP. The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com .