9:00am (EST)
The bulls were counting on the Federal Reserve to unleash another round of quantitative easing (QE) and got the hat trick after Ben Bernanke officially signed-off on QE3. We said on Wednesday that The Bernanke needed to overpromise and wow Wall Street which he did.
The Fed said it would purchase $40 billion of mortgage-backed securities a month in an effort to improve the on again, off again recovery in housing. The open-ended purchases were not expected because it means the Fed could continue this for a few years, until they are satisfied.
Over $120 brillion in securities would be purchased by year-end which would bring the Fed’s “money creation”, or printing press, to over $3 trillion since they began the process 4 years ago. Yet, unemployment has been above 8% the entire time.
The Dow zoomed 206 points, or 1.6%, to settle at 13,539. The blue-chips reached a peak of 13,573 and easily challenged our next resistance zone of 13,500-13,600. We have been saying since mid-August the Dow has a shot at 14,000 in September and yesterday’s Fed announcement could get us there.
The S&P 500 jumped 23 points, or 1.6%, to finish at 1,460. We have been calling for a print of 1,450 and yesterday’s high of 1,463 clears the way for a possible run to 1,500 this month.
The Nasdaq soared 41 points, or 1.3%, to end at 3,155. Tech traded to a high of 3,167 and is now on track to test our 3,250 target for September. The Russell 2000 was up 11 and closed at 856 while the S&P Volatility Index ($VIX, 14.05, down 1.75) dropped 11%.
Gold and silver surged as inflation fears sent the metals higher. Gold added $35 to close at $1,769 an ounce after reaching $1,775 intraday while silver gained $1.31 to finish at $34.68/ ounce.
Here were our thoughts in the Weekly Wrap on Sunday and in our Daily on Monday morning:
“Gold was up another $35 on Friday and closed at $1,737/ ounce. As you can see from our longer-term charts, our initial target on a rebound was $1,800 but given the velocity of the recent move, gold could trip $2,000 this year.
We said in July to add to your Silver positions at $26 by buying American Eagles. If you do not know how to do this, email our support team. We have been saying once $30 tripped, a quick push to $40 could come. Silver was up another buck on Friday and closed at $33.68/ ounce” (End)
Silver is up 30% since our late-July prediction and we sure hope everyone was buying Silver Eagles like we suggested.
We may have another busy day but we don’t mind as we have closed some Monster winners this week (pun intended). Futures are showing a higher open and look like this: Dow (+32); S&P 500 (+4); Nasdaq 100 (+9).
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