The market has rewarded the dip buyers once again this year with a 4% SPX rally over the
past week or so as it has moved up toward the recent all-time closing high. The 10 and 25
day m/a's have turned up and the SPX shows only a modest 1.8% premium to its 25 day m/a.
Traders like the idea of the Janet Yellen selection to head the Fed and think they will have a
new friend in a very high place. Concerns about damage to confidence from the Gov't.
shutdown and nasty debate about the debt limit have been shelved and worries about a
Fed decision to curtail its QE program were set on a back burner. Players rightly concluded
the political fight in DC would not end with the worst outcome and are even speculating that
with new shutdown and debt ceiling deadlines in place for early in 2014, the Fed may have no
choice but to hold off the taper even longer.
It would be strange if the guys did not press the SPX up to a new high to celebrate the reprieve
on the present shutdown, debt ceiling worry but take care to remember the old phenomenon
of "buy the rumor, sell the fact".
One item of interest on the attached chart: Note the downtrend in the MACD. No break here
would suggest limited upside, indeed.
SPX Daily
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