http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks Moment of Truth for US Stocks For even the strongest market rallies there comes a time, a moment of truth, when earnings and the prospect of future earnings need to support continued market growth. When that does not happen, the rally will fizzle or even crash. According to market watch that moment of truth for US stocks will come sooner rather than later. the next two weeks in the u.s. stock market are bound to be more interesting than usual as companies begin reporting third-quarter results and central banks around the world start talking in earnest of draining liquidity from the financial system. the market could move quickly, so we need to be ready. i have a strategy designed for that, and so should you. demand for stocks, bonds and real estate are driven by liquidity. the more money that chases those asset classes, the higher those investments’ prices will rise. that is simple supply and demand, and it works on both sides. The author writes that there are two possible routes forward based on supply and demand of investment vehicles, namely stocks and bonds. A case in point is the Fed’s decision to start liquidating its bond portfolio. Another is the European Central banking printing about $60 billion worth of money each month. Quantitative Tightening When the Fed was buying bonds it was called quantitative easing. Now that they will be selling or letting bonds expire it is quantitative tightening. the market oracle writes about what happens when the Fed reduces its $4.5 trillion balance sheet. the federal reserve announced last month that they would start to reduce their $4.5 trillion balance sheet in october, thereby starting the process we call quantitative tightening (qt). as expected, they are aiming to do it gently and quietly, by not reinvesting bonds as they mature, starting with sums of around $6 billion of treasuries and $4 billion in mortgage-backed securities (mbs). the scale of non-reinvestment will gradually increase. once in full swing, the fed’s balance sheet could reduce by up to $150 billion each quarter. conventional analysis might conclude that the fed’s balance sheet reduction (deflation) would be bad for us treasuries and mbs — after all, those are the instruments not now being bought by the fed. notwithstanding the fact that we dismiss that sort of causality thinking anyway, we’re not conventional analysts, and take a different angle.

1. Moment of Truth for US Stocks
By www.ProfitableTradingTips.com

2. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
For even the strongest market
rallies there comes a time, a
moment of truth, when earnings
and the prospect of future earnings
need to support continued market
growth.

3. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
When that does not happen, the
rally will fizzle or even crash.

4. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
Click the links below to get your
FREE training materials.
Free Weekly Investing Webinars
Don’t miss these free training events!
http://www.profitableinvestingtips.com/free-webinar
Forex Conspiracy Report
Read every word of this report!
http://www.forexconspiracyreport.com
Get 12 Free Japanese Candlestick Videos
Includes training for all 12 major candlestick signals.
http://www.candlestickforums.com
Before We Continue…

5. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
According to market watch
that moment of truth for US
stocks will come sooner rather
than later.

6. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
“the next two weeks in the u.s.
stock market are bound to be more
interesting than usual

7. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
as companies begin reporting third-
quarter results and central banks
around the world start talking in
earnest of draining liquidity from
the financial system.

8. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
the market could move quickly, so
we need to be ready.

9. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
i have a strategy designed for that,
and so should you.

10. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
demand for stocks, bonds and real
estate are driven by liquidity.

11. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
the more money that chases those
asset classes, the higher those
investments’ prices will rise.

12. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
that is simple supply and demand,
and it works on both sides.

13. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
The author writes that there are two
possible routes forward based on
supply and demand of investment
vehicles, namely stocks and bonds.

14. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
A case in point is the Fed’s decision
to start liquidating its bond portfolio.

15. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
Another is the European Central
banking printing about $60 billion
worth of money each month.

16. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
Quantitative Tightening

17. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
When the Fed was buying bonds it
was called quantitative easing.

18. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
Now that they will be selling or
letting bonds expire it is
quantitative tightening.

19. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
the market oracle writes about what
happens when the Fed reduces
its $4.5 trillion balance sheet.

20. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
“the federal reserve announced last
month that they would start to
reduce their $4.5 trillion balance
sheet in october, thereby starting
the process we call quantitative
tightening (qt).

21. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
as expected, they are aiming to do
it gently and quietly, by not
reinvesting bonds as they mature,
starting with sums of around $6
billion of treasuries and $4 billion in
mortgage-backed securities (mbs).

22. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
the scale of non-reinvestment will
gradually increase.

23. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
once in full swing, the fed’s balance
sheet could reduce by up to $150
billion each quarter.

24. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
conventional analysis might
conclude that the fed’s balance
sheet reduction (deflation) would
be bad for us treasuries and mbs

25. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
after all, those are the instruments
not now being bought by the fed.

26. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
notwithstanding the fact that we
dismiss that sort of causality
thinking anyway, we’re not
conventional analysts, and take a
different angle.

27. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
as the insights column of our
interest rates pro service alluded to
last month, the fed’s qe program
has crowded out investors in the us
treasury space.

28. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
the market supply of us treasuries
was reduced by the fed’s program
and so it forced bond investors to
buy other instruments, such as
corporate bonds.

29. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
now that more us treasuries are
going to be available for
investment, those funds may be
tempted to switch the corporate
bonds they hold back into (“safer”)
us treasuries.

30. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
the unintended consequence of qt,
therefore, may well turn out to be a
widening in corporate bond yield
spreads.

31. http://profitabletradingtips.com/profitable-trading-tips/moment-of-truth-for-us-stocks
The point is that this could be a
moment of truth for US stocks and
bonds as a big chuck of equity gets
removed from the markets and
interest rates ease up as well.