FOMC Announcement & PIIGS Problem Update
The Fed announced “no change” to the current interest rate outlook; However, the Fed quietly stopped buying Mortgage Securities and the home buyer’s tax credit also will expire by April 30, 2010. Since the housing recovery is important to the economic recovery, this will pose a threat.
The problem with the PIIGS countries (Portugal, Italy, Ireland, Greece and Spain) worsened. As of 4/25/10, the S&P downgraded Portugal 2 notches and today (4/28/10) downgraded Spain. Greece is currently waiting for a rescue from Germany/IMF.
Based on the last 4 crisis from the past 20 years, the market was up 15% higher one year later. Will this time be any different? Below are the past 4 crisises:
1. Mexico Peso — Dec 1994
2. Asian “Contagion”; led to Thai Baht currency crash — July 1997
3. Russian Rubble Devaluation; led to LTCM bail-out — Aug 1998
4. Argentine Gov’t Default — Nov/Dec 2007
From a technical perspective, the major indices also ran into the 200-sma resistance; Below are the weekly charts of the 200-SMA since the 1900’s and foreign markets.
DJIA 1900 to Present(Weekly)
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- DJIA 1900 to Present(Weekly)
