What Correction?

The Fed accommodates, and markets around the world celebrate.

Big Ben lit a fire under the futures market after the closing bell yesterday. Stocks, gold and everything in between surged higher as Bernanke answered questions.

For the past month, markets screamed for a little bit of clarity. They got it—along with an un-ceremonial burial of any hawkish thoughts that might have surfaced over the past several weeks…

Here’s your 5-second review:

Tapering? Yeah, soon enough. But interest rates will stay as low as possible. And everything remains tied to unemployment, which is a bit sluggish. The end.

Yet even before yesterday’s Fed circus, the market was painting a new picture for us. The broad market defied its summer downtrend and sparked a massive rally. Now, just a few days later, stocks are again knocking on the door to new all-time highs.

“The ‘new’ market picture isn’t a whole lot different from the old one,” says my colleague Jonas Elmerraji. “We’re still seeing a set of higher lows in the broad market from November. It shouldn’t come as a big surprise that we were much more likely to see a correction than a major change in trend.”

Jonas continues…

“One of the few absolutes in the world is that trendlines do eventually break. Now we’ve got a fresh one in place…”

S&P 500 Large Cap Index

Futures are pointing to a huge open today. We could very well see explosive follow through. New all-time highs are not out of the question.

However, there’s no need to chase stocks here if you feel like you’re underexposed. Let the market come to you…

Regards,

Greg Guenthner
for The Rude Awakening

The Daily Reckoning