Digestion

After a day like yesterday, it’s nice to see some normalcy.  The most bullish thing that can happen right now is for the markets to move sideways for a couple of days.  If it does that, the likelihood of further gains increase.  You don’t want a complete breakdown after yesterday’s nice gains. 

Given the good news that came out yesterday regarding the Fed, I’m hearing more chatter in regards to risks in the marketplace being a little lower.  I agree.  I heard it mentioned today that basically it’s like a clogged sink.  The Fed was pouring water down the drain to fix the problem.  Yesterday, they actually unclogged the drain.  Without that extra liquidity, banks can’t lend, borrowers can’t borrow, businesses can’t sell products, and stocks can’t go up.  Addressing the problem was the first step. 

Yesterday morning, the market went up after the Fed news but started to fade midday.  But, in the afternoon, it was reported that the Fed stated they could up the amounts of mortgages they will take on.  This basically says if it isn’t working, we’ll just do more.  That’s what investors want to hear.  They want a Fed that’s in control and driving the ship.

Another positive yesterday was the fact that this was not just a U.S. effort.  Central banks around the world all appear to be on the same page in regards to making sure global growth continues for several years.  When global growth is accelerating, it solves a lot of problems for a lot of countries.

Today, stocks are a little safer.  For the short run, I’m a little more bullish.  Don’t get too confident though.

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