The rally got a big boost on Wednesday after the Fed announcement that they will start buying Treasuries and mortgage-backed securities (i.e. they will be creating money from thin air for these purchases!) This caused the US Dollar to drop even further, and Bond yields to drop, bringing mortgage rates down as well. The drop in the US Dollar caused a continued rise in Oil prices, closing above $50 per barrel, and Gold to surge to $952 per ounce. Welcome to the world of dollar induced inflation (two weeks ago I suggested that the US Dollar had probably hit a top.) Overall we saw a rise in most commodity prices this week.
Also three more banks were shut down, and two credit unions were shut down this week. And lets not forget, new unemployment claims this week came in over 600,000 again!
Next week the market might signal what direction it wants to follow. If it can move above the 50 day moving-average line (chart above), and that line can start turning up, we could see a much bigger rally in the coming weeks.
We also await the much anticipated bank rescue plan from the Treasury (the last 'much anticipated plan' from the Treasury turned out to be a big nothing).
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The Dollar Is Dead
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