Please Stop Worrying About the Fed!

09/18/2007 12:00 am EST


Mark Leibovit

Chief Market Strategist,

Mark Leibovit, chief market strategist for, says stocks are heading higher no matter what the Federal Reserve does at Tuesday’s FOMC meeting.

Analysts and financial journalists alike are betting the future of our nation's financial survival on the outcome of Tuesday's Federal Open Market Committee decision. Many feel the move [may be] too little, too late, and the country is headed into recession regardless.

Of course, we're too smart to fall for all that nonsense. As you know, the stock market looks beyond a recession or well before it and the mere talk of it (as, by the way, we heard all last year) is confirmation the bull market is alive and well.

Do you think except for psychological reasons there is any basis for us to put undue emphasis on Tuesday's FOMC meeting outcome? The answer, of course, is no. But the bear trap is being carefully prepared for those who believe otherwise. [That’s why] I am confident the stock market indexes will see new all-time highs in coming months and all the poppycock you hear to the contrary is just that—poppycock.

Yes, the US dollar has been among the first casualties of the Fed's massive injections of liquidity over the past few weeks, sliding to 15-year lows. And yes, gold prices have broken out above $700 per ounce to their highest [levels] in 24 years. So, what? These are trends that are well established and should continue in the years ahead.

Quadruple option expiration is ahead this coming Friday and we noticeably didn't experience any downside volatility this past Wednesday, a traditional “Weird Wally Wednesday”—the Wednesday of the week before options expiration where such volatility usually manifests itself. It appears, however, this week an attempt will be made to scare the bulls and run up the put options, but I'm not so sure it's going to stick.

I'm still looking at that “reverse head-and-shoulders” pattern in the major blue-chip indexes, confirmed above the highs of 1496 in the Standard & Poor’s 500 on September 4th and especially 1503 on August 8th. Target measurement? 1630 in the S&P 500! My current thinking, however, is that should we break out at this time, we're certainly going to see follow through, but not to the extent of the aforementioned maximum measurement.

My bottom line is to remain bullish on crude oil, gold, commodities in general, and yes, stocks. Gold and stocks more or less track together and should both work higher over the intermediate term.

Gold shares are stocks and if the general market takes a nosedive, I suspect they will retrace as well, especially if the US Dollar index chooses to recover recent losses. As stated, my next big upside target for gold bullion is $875, but I have no specific time frame for the fulfillment of that target.

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