Even with well thought out research and analysis there is no
way to determine what the Federal Reserve Bank and Ben Bernanke are going to do
next. Their plan to “Taper” Bond purchases was reversed in a matter of days and
the stock market was sent higher. Unfortunately for us very few people are able
to get Ben’s information before he goes public. In my opinion the Federal
Reserve originally had a thoughtful plan to taper off their $85billion per
month of bond purchases. Yes this did raise rates, but like I stated in last
week’s email it wasn’t necessary a bad thing. The normalizing of rates higher
would relieve the massive speculation that was going on in markets like
housing. Short term pain for longer term benefits. For the stock market I
fundamentally and technically feel the same in that we should use caution.
Especially if Ben Bernanke and the Federal Reserve are not able to get rates to
fall. Plus there is a new headwind with the rise in oil prices as a result of
Egypt and market speculation fed by Ben Bernanke (pun intended!). That will act
as a tax against the economies of the world and slow growth. If the S&P 500
index passes 1687 then it might have some more upside, but I feel its limited
compared to the downside. Sometimes exercising caution when crowds are at a
frenzy is one of the toughest things to do!
S&P 500:
10 Year Treasury Bond:
Oil:
