Wow. An interesting day. Really, really interesting. Why? Because the Fed Yellen took away QE, but did not promise more. Of course, that will change if the market falls hard over time. She'll use QE again only if there's an emergency. Her emergency is a falling stock market. Morgan Stanley (MS). Yellen also did what made the most sense of all. She once again promised to keep rates near or at zero "for a considerable period of time". That basically means until we see the economy truly recover, which also coincides with global economic situations away from home. China, Japan, and the entire Euro Zone, on some level, is struggling and she knows this has an adverse affect on our economy.
When she feels the rest of the world has their act together she will then begin to remove the zero interest rate environment. Then the market can truly fall. When the Fed makes these comments, especially when the world was wondering if she would really pull the plug on QE, the market reacts quite violently. Today was no different once she made her comments. We fell a ten handle on the S&P 500, only to see it get mostly recovered before falling one more time, and then recovering once again. When all was said and done we had some red arrows but nothing terrible. Let's face it, the market has known this was coming for quite some time, and that's why it didn't crater out the way many expected. In the end it was all nothing from nothing. She let everyone know for several months this was coming by the level from which she was cutting back. Ten billion monthly overall. So now we know her intentions. The market's reaction was seen for the short term, but now we have to see how things follow through in the next few days.
It's back folks. Froth at its best. The bull-bear spread at 30.7%, which is a bad number, but if we look underneath the surface it's worse, much worse since the bears are down to 16.3%. Horrific. This normally means that the bulls need to be taught another bad lesson. That would normally be the case, but you have to ask yourself if that's the case now, since rates seem to be the king of all things related to stock market growth. The Fed is protecting with rates as we know, so you have to wonder if the froth is going to knock the bulls down, or whether the rate situation will hold things up longer than they normally would or should.
It does tell us that you should never let your guard down. It says don't get carried away with complacency. It doesn't mean you can't find good plays, but it also says to make sure you don't over play and that you should always keep tight stops on anything you do to the long side. It didn't take long to ramp froth back up. We were down to the 23% area before ramping back up to the first red flag number of 30%. After this week, if the market holds up, and that's a big if, the number will be back well in to the 30's once again, and that's just not the best of news for the bulls. Bottom line is froth is back. Bears are hard to find, and that's a warning flag to not get too optimistic with too many long set-ups. Pick a spot here and there, but be careful and appropriate.
The S&P 500 is playing on either side of 1975, or the critical long-term up-trend line. No blow out above, which is what the bulls want to see. No crash out, which is what the bears want to see. The futures are down this evening, but who knows where they'll be in the morning. QE is over, but rates will stay down there. Anything goes here folks.
Don't marry yourself to any one way of thinking. Let's take it a day at a time, until this market makes a clear move, and, even then, you may not be able to trust it. There's a lot going on out there from froth to rates, and this makes the environment difficult to say the least. Lots of whipsaw, and that's never too much fun, nor is that easy to trade. Earnings aren't bad this evening with financial stocks holding well after hours with earnings from V. Hard to kill a market that has good news from those financial stocks. Anything truly goes here. Take it slow.
This Web site is published by AdviceTrade, Inc. AdviceTrade is a publisher and not registered as a securities broker-dealer or investment advisor either with the U.S. Securities and Exchange Commission or with any state securities authority. The information on this site has been obtained from sources considered reliable but we neither guarantee nor represent the completeness or accuracy of the information. In addition, this information and the opinions expressed are subject to change without notice. Neither AdviceTrade nor its principals own shares of, or have received compensation by, any company covered or any fund that appears on this site. The information on this site should not be relied upon for purposes of transacting securities or other investments, nor should it be construed as an offer or solicitation of an offer to sell or buy any security. AdviceTrade does not assess, verify or guarantee the suitability or profitability of any particular investment. You bear responsibility for your own investment research and decisions and should seek the advice of a qualified securities professional before making any investment.
Recommended Content
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
Google starts indexing Bitcoin addresses
Bitcoin address data is live on Google search results after users realized on Thursday that the tech giant started indexing Bitcoin blockchain data. However, mixed reactions have followed the tech giant's reversed stance on the cryptocurrency.
A Hollywood ending for fourth quarter GDP
The latest revisions put Q4 GDP at 3.4%, the second fastest quarterly growth rate in two years. Much of the upside was attributable to stronger consumer spending, yet fresh profits data affirmed it was a good quarter for the bottom line as well with profits up by the most since the Q2-2022.