The next couple of days in the stock market could be on the quiet side. You see, the Federal Reserve is holding a two day FOMC meeting on Tuesday, and Wednesday. Many institutional traders are going to be on hold until they hear what the Federal Reserve Chairman Ben Bernanke says. As you know, most institutional traders and investors are just dying to hear the words quantitative easing three (QE-3). The likelihood of this happening this time around is very slim
Recently, the central bank of the United States( Federal Reserve) has leaked rumors of another massive stimulus program via the media, however, they have not acted on it as of yet. It is very important to remember, the Federal Reserve is still continuing it’s Operation Twist program. The Operation Twist program is where the Federal Reserve sells short term debt and buys the long term bonds. This helps to keep interest rates artificially low for mortgages and long term loans. The United States can continue to borrow money as the debt service or the interest it pays on the debt continues to declines.
On Wednesday, August 1st, 2012 the Federal Reserve will make it’s statement on interest rate policy for the United States. Most traders expect the central bank to keep the fed funds rate at zero percent. Please understand, the fed funds rate (overnight lending rate to the four large banks) has been at zero percent since December 2008. Chairman Bernanke will likely say they has will stand ready to act on another quantitative easing program or stimulus package if he see’s that the markets need it. Some leading equities that will be very volatile after the FOMC meeting on Wednesday afternoon include SPDR Gold Trust (ETF) (NYSEARCA:GLD), iShares Barclays 20+ Yr Treasury Bond (ETF) (NYSEARCA:TLT), iShares Barclays 7-10 Year Treasury Bond Fund (NYSEARCA:IEF), and the PowerShares DB US Dollar Index Bullish (NYSEARCA:UUP).