If you're a bull, then you want things to be as quiet as humanly possible for a while. Why? Simple really. The market has run up, and thus, got overbought, and nearly overbought on many different time frames, but most importantly, on the daily and 60-minute short-term charts across the board. When that occurs, it's best for the market to unwind those short-term oscillators at the very least. And if it's really bullish, things will unwind more on the oscillators than on price. That's clearly what we saw happen today.
We are no longer overbought, although far from oversold on those short-term charts, yet today was a flat day for the markets across all the key indexes. Fractional losses.
No loss in price, yet some unwinding makes the market bulls pretty darn happy. I can't blame them. It's more of a red flag, if you unwind slowly, while price races down. But here we have the exact opposite situation taking place. The Nasdaq is acting as if it does not want to surrender its big breakout over 3025, while the S&P 500 is acting as if it wants to join the breakout party, with a move over 1425 in time. No guarantee that will take place, but you have to love the way things look technically. Breaking out could take a lot more time, but so far, the action is good for the bulls. Something can always come along and ruin the set up, but we can only go by what exists in the moment. For now, it's far more of a bullish set up. A good day for the bulls.
Mr. Bernanke has to be breathing a sigh of relief for the time being. He doesn't want to implement a QE3 program, but will be forced to do so, if the market were to turn down drastically. With the market moving higher overall, he gets a much needed vacation from an act of desperation he really wants no part of anyway. To add a boat load of inflation in to a recessionary environment is an act he fears.
With unemployment on the increase along with foreclosures, not to mention more folks having their pay cut, it's not the best time to be making it tougher on the average person with the cost of food, etc.
He wants the economy to try and recover naturally, without having to use intervention.
I don't know if he gets to have that become a reality over time, but he has to be happy that the market is acting better. As long as it's acting better, he will not need to act. It's a happier time for the Fed as you must keep in mind at all times that he does what he needs to do based on Wall Street. If Wall Street falls apart so does the wealth of this country. Only then will he be forced to act. While Wall Street is holding up he gets to relax. Better times these days for Mr. Bernanke.
It seems as if the problems of Europe have gone away, doesn't it? They haven't, but for some reason, the market is acting well. It's acting as if it knows it has protection. It's acting as if it believes something will come along to help out the economies around the world. Is that the truth? I don't know but it's acting as if that's what's upon us down the road. A happy ending, and hey, we all like happy endings. Of course, what looks happy one day may not look so happy in a few months, so you never let your guard down. Never get complacent, because that's when the carpet gets pulled out from underneath you. Respect all possibilities, and you'll live to tell about it later. For now, the Nasdaq remains on breakout, while the S&P 500 waits to join its brother on the happier side of its wedge still in place. If we can get the Nasdaq and S&P 500, both on breakout through their respective wedges, it's lights out for the bears.
One day at a time.