Chris Ciovacco: The Glass Half Empty Quad:
- The Fed will phase out QE
- Waning bullish conviction
- Deflationary forces
- Tepid global growth
Bullish Case Has Been Covered
Regular readers know we have backed up the longer-term bullish case with evidence from defensive consumer staples, the VIX Fear Index, and ETF leadership. Financial markets have almost an infinite number of moving parts. Consequently, understanding bullish and bearish arguments allows for a more balanced view of investment risks. Today, we examine the investment landscape from a glass half empty perspective.
The Fed Will Phase Out QE
If you follow the financial markets closely, and more importantly understand the mechanics of the Fed’s quantitative easing (QE) programs, you cannot overstate QE’s impact on the stock market. QE matters and a market without a QE tailwind may struggle unless the global economy can grab the baton from the Fed. In his latest investment outlook, Bill Gross, the manager of the world’s largest bond fund, wrote:
“The Fed will have to taper, cease and then desist someday. They can’t just keep adding one trillion dollars to their balance sheet every year without something negative happening – either accelerating inflation, a tanking dollar or a continued unwillingness on the part of corporations to invest because of the resultant low and unacceptable returns on investment. QE has to die sometime.”
Waning Bullish Conviction
In this week’s video, we referenced slowing bullish momentum as an increasing concern. What exactly does that mean from an economic and technical perspective? The technicals allow us to monitor the never-ending battle between bullish economic conviction and bearish economic conviction. When bullish economic conviction is much greater than bearish conviction, the markets have positive momentum, which can be seen via the steep slope of the Dow’s 50-day moving average below (labeled A). When the battle between bullish and bearish conviction is relatively even, the result is a slope like what we have now (see B). Slowing momentum has been helped by the fear of how markets will react to tapering by the Fed.
Dow Jones Industrial Average (INDEXDJX:.DJI)
Credit bubbles fuel overconsumption. During the bubble years, consumers borrowed money and loaded up on everything from HDTVs to vacation homes.(...)Click here to continue reading the original ETFDailyNews.com article: Dow Jones Industrial Average: 4 Reasons To Respect The Bearish CaseYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
- 4 Reasons To Respect The Bearish Case
- Dow Jones Industrial Average: Is The Market Tipping A Bearish Hand?
- Dow Jones Industrial Average: Several Bearish Indicators Showing Up
- Dow Jones Industrial Average: 6 Reasons To Be Bullish On The Stock Market
- Dow Jones Industrial Average: 4 Reasons Why The Upward Trend Is Over
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Press Release Service provided by PRConnect.
Stock quotes supplied by Telekurs USA
Postage Rates Bots go here