Friday, October 29, 2010

Market Update - 29 Oct 2010

Dear Traders,

The U.S. Markets have performed remarkably these few weeks.

The Dow Jones Industrial Index and S & P 500 Index have surpassed the Aug 2010 High and have almost reached the late April 2010 High. But the Nasdaq 100 (an Index comprises mainly of Tech Stocks) has performed even more impressively by breaking the April 2010 High shown below.

A lot has been said whether the current market rally has been caused by Quantitative Easing (QE) measures by the Feds, which have been used previously to revive US from the 1930 depression and also adopted by Japan when interest rate has reached 0%. Money have been created to help increase the level of reserves held by the commercial banks. Securities have been bought in the open market by bank institutions.

The following video gives you a good idea of what Quantitative Easing (QE) is all about :

I'm not an expert whether this could be the real cause. But I do notice the US exchange rate against our country's (Singapore) currency has dropped tremendously. A market rally is usually tied to the country's economy strength. Is the current US stock market rally indicating the US economy is strengthening? But how do we explain the weak US currency?

May be fellow traders familiar with economy can enlighten me.


Tony Chai


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