Thursday, 23 May 2013

Ben says QE3 might slow soon, how will market unfold?

Dear Friends,

The recent rally in Dow is without doubt fueled by the QE. Even bad economic reports are treated as great weapons by the bulls. The bulls have been holding on to the belief that bad news are good news. However all this may come to an end IF QE3 really starts to taper.

Article in marketwatch:
http://www.marketwatch.com/story/bernanke-premature-tightening-could-end-growth-2013-05-22

We predict that Quarter 3 might not be as easy. If everything goes according to what this marketwatch suggests, tapering may start as early as june. We then have to be careful in our decision to go long. Confidence might start to waver. Those who bet and make money on the QE3 might start to fumble.

Hence these few days, it is important to note the market confidence. See whether there are any changes to how the market respond. It might, given the powerful 6 months rally!

A triple day drop is one signal that market confidence has wavered. Do take note of the 20day MA too! A down direction will indicate the start of a mid term down trend. A 2 weeks drop will be the final confirmation. 

However today is still early to know how the market might react these few days. Just watch how the market reacts.

Rgds
Daniel


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