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The Trade to Make Before Next Week's FOMC Meeting

By Jeff Clark
Friday, June 15, 2012

Everyone knows the cliché, "Few things in life are certain." Well, even fewer things are certain when it comes to the financial markets...
But one thing we can usually count on is the willingness of the political class to do whatever it takes to goose the economy and the stock market higher just in time for an election.
And that means a third round of quantitative easing. The only question is whether it happens in July or after the Federal Open Market Committee meets next week. 
Either way, we'll make money by investing in a sector with a history of performing well following QE announcements... 
Copper loves quantitative easing.
But right now, copper is in a miserable downtrend. The metal is down 15% over the past six weeks. Take a look at this chart...
Copper is suffering from fears of a global economic slowdown. Europe is in a recession. China isn't growing as fast anymore. And the U.S. economy is hardly growing at all.  
Since copper is an industrial metal, its price is sensitive to economic conditions. The price rises when investors anticipate growth. It falls when things slow down. So it has been falling lately.
But that may change as early as next week. Look at this longer-term chart of copper...
The blue arrows on the chart correspond to each date over the past four years where the Federal Reserve indicated its willingness to flood liquidity into the financial markets.
As you can see, the Fed announced its first quantitative easing program on November 25, 2008. It expanded the size of the program on March 18, 2009.
The Fed hinted at starting a second QE program on August 27, 2010. And it formally announced QE2 on November 4, 2010.
Finally, on October 4, 2011 the Fed joined with the rest of the world's central banks in a coordinated effort to provide liquidity to troubled European banks.
Copper rallied after each announcement. It'll rally after QE3 is announced as well. My guess is that will happen in July. But it may happen after the FOMC meeting next week. Either way... buying copper today – after a 15% decline over the past few weeks – could turn out to be a well-timed trade.
Best regards and good trading, 
Jeff Clark

Further Reading:

If you're comfortable with a little more risk, consider one metals company Jeff recently recommended to his Advanced Income subscribers. Since November, shares have fallen off a cliff. But now, it's set to generate large, fast profits. Get the details here: This Risky Trade Can Lead to Incredible Profits.
In addition to a third round of quantitative easing, Jeff recently told Growth Stock Wire readers about another bullish indicator... "There's no telling for sure what we'll get this time around," he wrote earlier this week. "But based on this rare buy signal, it's a good idea to buy stocks into any weakness over the next few weeks..." Get the full story here: This Indicator Just Flashed a Rare Buy Signal.

In The Daily Crux
Market Notes
Dollar General, Dollar Tree, and Family Dollar all break out to fresh all-time highs.  
"Slow and steady" utility continues... fresh multiyear highs for Dominion and NextEra Energy.
"Boring" stocks keep climbing... AT&T, Verizon, Pepsico, and Kimberly-Clark notch fresh 52-week highs.  
Nokia plunges to a 15-year low... company plans to lay-off one-fifth of its workforce as its business continues to lose money.
Market Watch
Symbol Price
S&P 500 1329.10 +1.1% +3.2%
Oil (USO) 31.73 +2.0% -18.9%
Gold (GLD) 157.75 +0.4% +6.1%
Silver (SLV) 27.82 -0.7% -19.8%
U.S. Dollar 81.84 -0.5% +9.9%
Euro 1.26 +0.4% -12.7%
Volatility (^VIX) 21.68 -10.7% +18.7%
Gold Stocks (^HUI) 449.49 +0.3% -11.8%
10-Year Yield 1.61 +0.6% -48.1%

World ETFs
Symbol Price
USA (SPY) 133.47 +1.1% +5.4%
S. Africa (EZA) 64.08 +0.3% -6.2%
Singapore (EWS) 11.81 +0.3% -10.1%
Japan (EWJ) 8.94 +0.8% -10.5%
S. Korea (EWY) 54.41 +1.1% -13.7%
Canada (EWC) 25.57 +0.5% -16.5%
Lat.America (ILF) 40.52 +1.0% -17.2%
Taiwan (EWT) 11.78 +0.6% -20.1%
China (FXI) 33.75 +0.2% -20.3%
Israel (ISL) 12.25 +0.8% -21.9%
India (IFN) 19.32 -0.2% -32.9%
Russia (TRF) 13.34 +1.1% -38.8%

Sector ETFs
Symbol Price
Retail (PMR) 24.42 +1.5% +20.9%
Utilities (XLU) 37.09 +0.7% +15.1%
Consumer Svcs (IYC) 79.31 +1.4% +14.2%
Big Tech (QQQQ) 62.36 +0.4% +13.8%
Real Estate (IYR) 62.07 +1.4% +8.4%
Health Care (IYH) 77.03 +1.4% +7.2%
Software (PSJ) 25.37 +1.0% +1.0%
Construction (PKB) 12.77 +0.3% +0.5%
Oil Service (OIH) 35.28 +1.9% +0.0%
Big Pharma (PPH) 37.44 +0.9% +0.0%
Industrials (IYJ) 66.27 +0.9% -0.7%
Biotech (PBE) 21.68 +1.9% -0.7%
Financials (IYF) 53.59 +1.3% -1.3%
Transportation (IYT) 90.93 +1.0% -1.7%
Media (PBS) 14.07 +1.2% -1.9%
Insurance (PIC) 15.51 +0.4% -2.5%
Defense (PPA) 18.64 +0.8% -4.0%
Water (PHO) 17.46 +0.8% -6.4%
Telecom (IYZ) 22.03 +1.6% -7.2%
Semis (PSI) 14.17 -0.6% -14.7%
Basic Mat (IYM) 62.95 +0.6% -15.7%
Nanotech (PXN) 6.17 +1.0% -28.4%
Alt. Energy (PBW) 4.26 +0.2% -50.5%

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