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Fed Brinksmanship

The System Open Market Account (SOMA) reached the top of the 5 month flat channel and the underside of the 5% long term growth channel on Tuesday, before pulling back today. To maintain the 5% growth rate in the SOMA, the Fed will need to keep pumping through the top of the flat pattern. Otherwise it would be signaling a tighter money growth policy, suggesting that Bernanke is still more concerned about inflation than any signs of an economic slowdown. An upside breakout would mean that the Fed intends to encourage inflation. Click here to download complete report in pdf format (Professional Edition Subscribers).

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