Bernanke Will not Derail the Markets
Tapering off the stimulus -- some have likened it to weaning a child from a bottle. I have likened it to taking drugs away from an addict. The market (SPX) and (QQQ) have been so dependent upon the stimulus for so many years that any hinting of Bernanke's monetary easing is bound to have an "initial" negative reaction like a spoiled child not getting what he wants.
Wanting to see improving labor markets in economic growth is all good and noble but I don't see how the markets will initially react negatively as they have to depend upon themselves again and not government stimulus.
The recent market reaction was needed in my opinion. We continued to move up for so long but we also need time to rest. The pullback we had last week may have provided that resting period before the market continues to move up again.
I am not convinced that we are in a turnaround mode yet. If I could say anything pessimistic about the markets it may be that were possibly in the early stages of building a top.
I like to tell investors to keep an eye on weekly and monthly market data because this is the information that is going to illuminate us on changes or trends that could be forming.
A combination of fundamentals and observing the technical picture of the markets is very important for long-term trading.
I think it will be a good idea to keep an eye on interest rates. If they increase, or as they increase, bond yields will start looking at less attractive and this may lead to a shift.
It might encourage bondholders to look at buying stocks and could also have a positive effect on keeping the markets moving up.