Bloomberg Economist Survey – 79% Say Fed Extends Asset Purchases

Federal Reserve Chairman Ben S. Bernanke will probably delay the central bank’s exit from record stimulus, economists said in a survey, giving the flagging economy a boost without resorting to additional asset purchases.

Seventy-nine percent of 58 economists expect Bernanke to sustain the Fed balance sheet at current levels until October or later, compared with 52 percent who held that view before the Fed’s last policy meeting in April, according to a Bloomberg News survey conducted last week. Ninety percent of those surveyed predict the Fed will wait until the fourth quarter before dropping its pledge to hold interest rates low for an “extended period.”

Bernanke and his fellow policy makers have given no indication they’ll tighten policy anytime soon. With manufacturing slowing and unemployment increasing during May to 9.1 percent, the Fed chief said this month growth is “frustratingly slow,” and Richmond Fed President Jeffrey Lacker said the economy could be “stuck below trend for some time.”

“The longer they signal they will be on hold for an extended period, they are de facto easing,” said Carl Riccadonna, senior U.S. economist at Deutsche Bank Securities Inc. in New York. Expectations the central bank will delay a policy reversal help reduce long-term interest rates and spur growth, he said.

http://www.bloomberg.com/news/2011-06-21/bernanke-may-try-to-spur-u-s-economic-growth-by-extending-record-stimulus.html

This would make sense according to the charts, I gave the alert out to go long QLD at $79.75 and I am currently over a dollar in the money as it is above $82 as I write this.

QQQ upside target is between $55.25 and $55.50.

Upside for the SPY is going to be $130 to $130.50.

I talked about the USO over the weekend and it is off of the lows and appears to be headed for a pierce of $38 with the 200 and 20 MA’s closing in on that level.

The market putting in a short term bottom here could most certainly indicate that we are in for a surprise regarding this Fed announcement as previously almost everyone expected the Fed to end QE. This means that we will get the rally I talked about but this does not mean that we have put in a long term bottom. I will discuss this more as it unfolds.

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About Aaron Basile
Market Technician, Equity/Commodity Trader, Austrian Economist, Contrarian Investor

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