We are in the final stages of an extension

With the FED pumping a ton of money into the markets every day, it should be recognized understandable that there is an upwards bias in the stock market as well.

Two events of the last week may signal that things are about to change: 

(1) CNBC on Thursday, through Pisani, generated new information about a rumor that the FED was going to taper down their liquidity pumping. 

(2) After the close on Friday and a new historic close (high), the Wall Street Journal's Jon Hilsenrath with an article in the on-line publication (after hours) reported on exactly that, a plan by the FED to reduce their purchases due to an improving economy (http://www.marketwatch.com/story/fed-maps-exit-from-stimulus-2013-05-10-191031815?link=MW_home_latest_news).

Interestingly, a week ago Friday (May 2), the bonds did a 180 degree turn, and changed their direction: The price of bonds has been falling since then ($TNX increasing) in a rapid manner. This is significant because bonds were just last week at historic highs, resulting from FED buying action. Bond holders started selling in anticipation of a FED exit, perhaps. 

In conclusion, we may have upon us a significant event, the end of aggressive monetary policy which started at the dark days of the 2008-2009 recession and financial crisis.

For the stock market, our quantitative analysis has been indicating a multi-year top around the current levels. However, with the current extension (it is visible on the MACD of daily charts), the actual top may be difficult to accurately pin point. 

In terms of self analysis, please refer to last Sunday's graph which was pointing to a high in the 1,636 area and then a retracement to 1,485 - 1,500's (which is also the anticipated 10% correction that everyone is talking about). 

The $SPX made an all time high close yesterday. Look here for an explanation of how this was accomplished by the robotic computers that run our markets: http://www.zerohedge.com/news/2013-05-10/how-manufacture-record-high-stock-market-close-friday-afternoon

As I mentioned a week ago, we may be "too late to go long and too early to go short".

DISCLAIMER 

This blog shall not be perceived as investment advice. This is a personal diary of our thoughts on the markets. Consult a professional broker or adviser before investing.  Any opinions, news, research, analyses, prices, or other information contained on this blog are shared as personal thoughts and provided as general commentary only.

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