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Is The Whipsawing Volatility Since May Over At Last?

  • Written by Syndicated Publisher No Comments Comments
    October 13, 2013

    For the last two weeks and early this week the market was to the downside on concerns about the lack of progress in getting the government re-opened and the debt-ceiling raised, and the whipsawing volatility since May continued.

    The last two days it has been relief that both sides are working on an agreement that would extend both the spending and the debt-ceiling, at least temporarily.

    And the market spiked up. Does that mean the brutal Fed and the government induced whipsawing volatility is over?

    The whipsawing began May 22 when Fed Chairman Bernanke first mentioned the possibility of the Fed beginning to taper back QE stimulus, perhaps as early as the June meeting. It caused the market to plunge.

    The Chairman rushed in at the June low with panicked assurances that any tapering would not take place until the economy can stand it.


    The market rallied to a nominal new high, but topped out again in August when hints began that the Fed would begin tapering at its September meeting.

    Signs of the economy slowing had the market begin to rally again from the early September low on hopes the Fed would have to delay tapering, and it experienced a big one-day spike up to another nominal new high when the Fed announced ‘no taper’ at the September meeting.

    But then Congress took over as the whipsaw producer, when after just that one-day relief spike-up on the ‘no taper’ decision, the market began plunging on fears of a government shutdown, and perhaps even a debt default if the debt-ceiling was not raised.

    And now we have a big two-day spike-up on expectation of that deadlock being resolved.

    The most bandied about expectation is for a six-week extension to allow more time for talks. And that it will be announced Monday night.

    It is unthinkable that, having raised hopes, they would dare to fail to provide that delay.

    A longer extension, perhaps three or four months, would make more sense, and would not surprise me.

    So is that finally the end of the whipsawing?

    Surely, this will not wind up being another quick relief spike-up like the ‘no taper’ reaction, before the market moves back to other concerns?

    What other concerns? Prior to the shutdown, concerns were over the worrisome signs that the economy and earnings were slowing. And the shutdown has added concerns that it may have further damaged the economy.

    And when the government re-opens, important delayed economic reports will be released, including the employment report for September, retail sales, and the U.S. Trade Deficit. And third quarter earnings reports will be flooding in.

    The jury is probably still out on volatility having ended.

    We shall soon see.

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    About The Author – Sy Harding, Street Smart Report

    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!

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