T2108 declines to 67%, still in neutral area. Only 12 of 44 stocks with good recent earnings that hit a new high on Wednesday closed above Tuesday’s price. Wednesday had a lot of stocks opening strong and selling off. Time will tell if this break brings in a significant decline.
It will be interesting to see if a reduction in monthly QE results in an increase in interest rates which results in a decline in the markets over the long term. Or, will this market simply stay strong because the economy is improving? Since the markets look forward 6 to 12 months… Anyone have any thoughts?
Thats not how QE works. A reduction in QE won’t result in higher interest rates, but it can result in lower economic activity due to liquidity and the markets to decline nominally since the Fed isn’t pumping money supply into the economy. The economy hasn’t really been improving in the last 4 years, its mostly been a “muddle through” at a low growth rate of 2% or slightly lower. The Fed has also said that they would tie the QE efforts to unemployment and need an unemployment rate around 6.5%. Considering the unemployment rate is at 7.5%, obviously if the economy were to show signs of growth they would end it. If you’re actually interested in the macroeconomic picture, then the real thing to watch is the unemployment numbers. A lot of economists are very skeptical of a 6.5% unemployment rate and probably expect to see the Fed start to wind down QE around 7.1 as unemployment will bounce and reach an equilibrium around 7%. Either way, the actual impact the Fed has on the economy with monetary policy has been rather minimal compared to the government with fiscal policy. Fiscal tightening by Federal, State, and Local has led to a huge decrease of jobs (I think about 1 million jobs lost if memory serves). Until government services can come back, expect a lot of uncertainty.
It takes a long time (many weeks) for a top to form and a bull market to end.
Hey Dr. Wish, It would awesome if your readers can post their own charts on this site. It would be a heck of a lot more interactive. There is a chart I d like to show but I can’t post it.