Invest Intelligence When It Realy Matters
Market Guidance & Investment Strategy
Taken from the opening section from the March 2012 issue of Dividend Gems
In late January the Federal Reserve Bank announced that it intended to keep short-term interest rates at current levels until at least late 2014. This announcement has several ramifications.
First, it implies that fixed income yields will remain low for some time. This bodes well for the U.S. stock market.
Second, it increases the chance of a sudden and large rise in interest rates beyond 2015.
Third, it further increases the possibility of further quantitative easing, which is also likely to boost the stock market. While the Fed has indicated that it did not envision another phase of easing, its actions speak louder than their words, as Fed officials have already discussed a modified form of easing.
Last month we discussed that the S&P 500 Index was in the process of closing in on the very important gap at 1360.
As of March 13 (intraday), the S&P 500 is trading at 1383, and has thus confirmed the bullish sentiment. Again, this is a very positive development that we feel was catalyzed by the interest rate announcement by the Federal Reserve in late January.
Furthermore, the S&P 500 Index has also blown past its short-term gap at 1372. Although it is still too soon to technically confirm a continuation of the short-term bullish trend, based on other variables and in absence of significant material events, we feel this bullish move will continue.
Last month, we compared the two most recent periods of economic and market risk (summer 2010 versus fall 2011). In this analysis, we noted the striking level of pattern symmetry, adding support for a continuation of the bullish move in the U.S. equities markets.
We must also take note of the much higher level of price volatility from the more recent period of ascent from the trough (fall 2011).