QE3…Happy Days Are Here Again!

The market loves the Fed; at least it did today.  It remains to be seen whether that trend continues.  Sell-the-news could still take over, so if you did try to play the Fed by shorting, you might wait a day or two before covering. 

BLOOMBERG (excerpt)

Blink! U.S. Debt Just Grew by $11 Trillion
“Republicans and Democrats spent last summer battling how best to save $2.1 trillion over the next decade. They are spending this summer battling how best to not save $2.1 trillion over the next decade.”


“In the course of that year, the U.S. government’s fiscal gap -- the true measure of the nation’s indebtedness -- rose by $11 trillion....”

“...The answer for the U.S. isn’t pretty. Closing the gap using taxes requires an immediate and permanent 64 percent increase in all federal taxes. Alternatively, the U.S. needs to cut, immediately and permanently, all federal purchases and transfer payments, including Social Security and Medicare benefits, by 40 percent. Or it can mix these terrible fiscal medicines with honey, namely radical fiscal reforms that make the economy much fairer and far stronger. What the government can’t do is pay its bills by spending more and taxing less.”   Full story at…
http://www.bloomberg.com/news/2012-08-08/blink-u-s-debt-just-grew-by-11-trillion.html

As I wrote a while back: Fiscal Bump; not Fiscal Cliff. The amount these fools are arguing over is a pittance when considering the big picture.  The risk to the stock market is that the debt problems may at some point cause some real damage to the economy

 

A 2010 report by economists from the University of Maryland and Harvard (Reinhart and Rogoff) that reviewed 200-years of economic data from 44 nations reached the ominous conclusion that (almost without exception) countries that are as highly indebted as the United States grow at a sub-par rate or incur recession.  According to them, the US was already past critical points of indebtedness in 2010.

MARKET RECAP                                                                               

Thursday the S&P 500 finished UP 1.6% to 1460 (rounded).  VIX fell more than 11% to 14.05. (That’s remains Good news for the bulls.)   

NTSM

The NTSM analysis switched back to BUY on Thursday.

Sentiment is not overly bullish and the %-above the 200-dMA is not extreme.  This indicates that it is possible for the market to continue its general trend up; however it wouldn’t surprise me to see a small pullback at any time.  In fact big-up days (like today) are often followed by a down-day and that’s my guess for Friday.  It's still my guess that the S&P 500 will top out within a month or so, but that is just a guess.

MY INVESTED POSITION

Based on the BUY signal, 6 July, I moved back into the market on 9 July (after the weekend) at S&P 500 1352. 

I currently have a 50% stock allocation overall.  For my age, that is what most advisors recommend as a fully invested position, however, I am normally much more aggressive.  I have less invested in stocks now because there’s a lot of risk.