A strong move today as price and volume moved in unison. It was a powerful move simply because we cleared the way for a new high in higher volume. After Monday’s session yesterday and today’s session has completely rendered Monday’s selling meaningless. While the price movement wasn’t large it was significant enough to produce new highs. Many will be afraid of new highs, but we know by history new highs beget new highs. Today’s close wasn’t as strong as we would have liked, but we’ll take today’s gains.
It appears we’ll continue to be bombarded by news over the Federal Reserve and it’s taper. Will the reserve bank repeat a 1937 mistake of taking away liquidity too fast causing a new bear market? Many believe this market is not being held up by the Federal Reserve’s QE program. What would happen to the market if we simply took away the program tomorrow? While this won’t happen it would be an interesting study on how much the market has relied on the Fed’s liquidity. The other question is do we trust the Fed enough to know when to pull the liquidity for a soft landing? 2008 market crashed the Fed never saw coming yet we have trusted them still to navigate these economic waters. Very interesting to say the least.
The advantage we have is we don’t have to figure out whether or not the Federal Reserve gets it right. So far, it does appear they are right and we are benefiting from a rising market. If this market is going to turn we’ll catch the turn and take advantage of the short side of the market. While Monday’s market took a step in the downward direction we simply could not get follow through and got two strong back to back days. Trying too hard for the market turns will chop you up as well and we know quite a few traders who have been trying to catch the turn.
Stick with the plan by cutting losers and riding winners. It works.
