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The Bull And Bear ‘Tug-Of-War’

  • Written by Syndicated Publisher No Comments Comments
    June 19, 2013

    The bulls see the economy gaining strength as home prices surge and employment grows, while the Fed continues to have the market’s back with stimulus it will keep in place until 2014, and then taper back slowly only after the economy has reached the point it can clearly stand on its own.

    The bulls point to how resilient the market is even with the recent talk of the Fed possibly tapering back on its stimulus sooner than previously thought.

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    The bears see the economy and markets living dangerously, like drug addicts dependent on periodic injections of stimulants by the Fed, with markets shaken at even a hint that their fixes may be tapered back.

    The bears point to how markets outside the U.S. have had a quite different reaction to the new uncertainties introduced by Fed Chairman Bernanke’s warnings on May 22, and believe they have it right.

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    The bulls are convinced Bernanke will set things right again in his press conference tomorrow afternoon, by assuring markets that QE will remain in place for some time to come.

    The bears also expect Chairman Bernanke to soften his warning that if the Fed sees improvement in the economy it “could in the next few meetings take a step down in our pace of purchases”, providing assurances it will remain in place because the economy is not yet close to being able to stand on its own.

    But they wonder how he can back-track on his other statement in the same testimony before Congress that, “Fiscal policy at the federal level has become significantly more restrictive. . . . . . In particular the expiration of the payroll tax -cut rate, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of sequestration, and the declines in defense spending; and are expected, collectively, to exert a substantial drag on the economy this year. . . .The Federal Reserve’s monetary policy does not have the capacity to fully offset an economic headwind of this magnitude.

    Short-term market patterns.

    Last week was the week before the quarter’s quadruple-witching expirations week, and they tend to be negative.

    This week is the week of the expirations (on Friday) and they tend to be positive.

    Next week is the week after the expirations and they tend to be negative.

    Continuing volatility?

    To read my weekend newspaper column click here:  What If The Secular Bear Market Is Not Over- 

    Subscribers to Street Smart Report: The new issue of the newsletter will be available this afternoon (a day early) in your secure area of the Street Smart Report website.

    Images: Flickr (licence attribution)

    About The Author

     

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more. 

     

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