daytrading may 11 pre-market, page-30

A post I did last night to do with QE and the rising US Markets

Its been my belief that the out-performance of the US Markets has been a combination of two factors.

First a handfuld of global dominance companies such as Apple, McDonalds and Google continuing to outperform

Secondly easy cheap money to invest in the markets as a results of the QE 1 & 2 programs as well as operation twist, which have also resulted in very low cash and fixed income returns making stocks seem even more attractive.

Take a look at the first image a 5yr chart of the DOW

Note the strong rally that started in March 2009 which lines up with when QE 1 started

Note the faltering in May-August 2010 lining up with QE 1 ending in June 2010

The 2nd leg of the Rally then began Sept 2010 which was around the announcement of QE2 and lasted until May 2011 lining up with when QE2 ended around June 2011

The Third Upleg began in Oct 2011 following the Sept announcement of Operation Twist and now looks to be faltering and it's May and guess what Operation Twist comes to an end in June

So I will say this the odds are high that unless we get an announcement of an extension of Operation Twist or another round of QE markets will be very rough from here until Sept

Given that the US Markets are not rolling over yet it would, not surprise me to see a Rally that lasts into June before the real sell offs begin as the QE programs come to an end

Then again this Sell in May sell off we are seeing could gather momentum