This morning’s quick spurt off the lows, courtesy ECB rumor inspired, made it again clear that markets need and want QE to rally. Janet Yellen is facing the first real decision of her chairmanship this week and must decide between credibility and outright pandering.
All we know is that since 2009 equity prices have not been able to sustain higher prices without QE. Now if the Fed goes the credibility route this week markets may actually get a dose of reality and sellers may be able to push their weight around a bit.
Since the Bullard “QE extension” comments sellers have been completely AWOL. What might be the fall surprise? A quick 3% dip below the October low for a 38.2% Fib retrace off of the September highs and the QE3 launch lows in November 2012:
That gets you to $ES 1759 sometime in November which may make this the Guinness bottom. Some may call it a bear’s wet dream, but if Yellen panders and extends QE we may just end up with a wet bear and not a wet beer:
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