As expected, the post debt ceiling fracas rally did take the SPX up to a new all time high.
The rally has brought the market into a moderately overbought position on a short term
basis and once again has the SPX up near a substantial overbought position with a six month
perspective in view. SPX Daily
Investor psychology is very positive now. Players know the market is entering a seasonally
strong period and few expect the Fed to begin a regimen of reducing the large QE program
just ahead. The rally leading up to the FOMC meeting anticipates no dicey equivocation
by the FOMC and no bluffing as well. The Fed might like to introduce some sort of temporal
note regarding the tapering of the program in view of how the market has called its bluff,
but the earlier comments about rolling down the program hurt the bond and housing markets.
Since the Fed does not like to be boxed in like this, It will be looking for avenues to gain more
leeway before long.
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