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Fed Sends A Powerful Message To The Stock Market Bears.....

Stock-Markets / Stock Markets 2014 Jul 31, 2014 - 10:30 AM GMT

By: Jack_Steiman


As I've been saying for the past few years, the Fed from Bernanke to Yellen has worked hard at fulfilling the duties of their job description. To keep the economy moving along through their actions regarding the stock market. The key to this long-term bull market has been, is, and always will be low rates. Nothing else. RATES! Ms. Yellen was being paid special attention to today, because the world wanted to know when she would speak out loud the dirty little secret about when rates would begin their cycle up. The market was ready to heave once the word was uttered out loud. It wasn't.

The market let everyone know that the time for the rate-hike cycle is nowhere near upon us at this moment in time. Yellen said housing is weak, and even when it strengthens she's not ready to let rates start rising. In other words, rates aren't going anywhere upward for an extremely long time to come. Same as it ever was, if you will. She knows the economy isn't strong, and she knows it'll be a disaster for the economy if she takes away the bull market. She's not about to begin that process. So, yes, bears, sadly your joy wasn't taken away today. Sure, we can pull back hard at any time due to massive froth and greed, that currently exists, but the longer-term bull still has some work to do over time. The Fed will be sure to make that a reality.

The news on froth just doesn't get any better, even with the market struggling for any sustainable upside action, and even with all the recent gap downs that have caused doubt in the minds of those bullish traders. The masses just don't want to turn bearish, and that's not what we want to see. Sideways action can cause lots of distress, but, thus far, that just hasn't happened. I wish it had, but with the current reading again at 39.4% bulls to bears, it seems only a true correction is going to turn more bulls in to agnostics or real bears. I have no way to know how long this market can hold up with this type of enthusiasm but you know the drill by now. Just relax and wait for the 50-day exponential moving average to disappear before turning bearish. You stay lightly long, until that occurs without front running the probability of it happening. See it and then play it. That's the name of the game for now. Play the price action, not your emotions. Froth is bad, but still hasn't interfered with the plan of the Fed to keep the market up.

I have talked quite a bit about not allowing emotion to rule your trading journey. This is one of those times when you'll be tested. You're going to want to play hard if you're bullish, but on the other side of things, you'll want to play hard if you're a bear on the short side. This goes back to recognizing where we are in this bull market. What phase of it we're in. It's clear what the Fed's intentions are, but it's also clear we are dealing with massive froth and greed. The push-pull has been clear for all to see for quite some time now, and it's not showing any sign of letting up. Gap ups get sold while gap downs get bought up. Neither side wants to give up here. When you're in this phase of the bull you want to avoid froth stocks for the most part. You want to avoid extreme beta plays as well as the whipsaw. They can drive you to emotional experiences you just don't want or need. Keep it simple. Lower P/E and lower beta the way, until more clarity is given for an upside breakout or downside breakdown. In the middle, you journey through very gently.

Day to day for now folks.



Jack Steiman is author of ( ). Former columnist for, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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© 2014

Mr. Steiman's commentaries and index analysis represent his own opinions and should not be relied upon for purposes of effecting securities transactions or other investing strategies, nor should they be construed as an offer or solicitation of an offer to sell or buy any security. You should not interpret Mr. Steiman's opinions as constituting investment advice. Trades mentioned on the site are hypothetical, not actual, positions.

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