By Daniel U. Alvarez
PEREIRA -- In an effort to further stimulate the global economy, the Federal Reserve announced this morning along with six central banks; the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada, the Swiss National Bank and the Federal Reserve “joint coordinated action to enhance their capacity to provide liquidity support to the global financial system”. According to the Federal Reserve the purpose of this action is to “ease strains” in financial markets. The central banks agreed to lower the price of the U.S. dollar liquidity swap by 50 basis points. Essentially, the cost of purchasing U.S. dollars by other countries was lowered in an attempt to stabilize global markets. This pricing agreement with be applied to all operations conducted from December 5, 2011 through February 1, 2013.
Assessment.
The immediate market response to this announcement is positive. The pre-open futures equity market rallied with the S&P 500 leading at 9:00 am with a 2.84% increase trending up. Gold is also up $28.60. This move also helped lower the U.S. dollar index (USD) by 1.05% to $78.32.
Calibrating a trade strategy is going to be difficult but I will use long-term cash for purchasing value stocks and short term for market swings. The following are some of the ideas I am assessing:
1) Long-term buy the $ANF, $DDS, $BRCM, $TIF dips.
2) Short-term buy the $FAZ, $TZA, $TVIX dips.
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