Courtesy of John Nyaradi.
A Janet Yellen euphoria will likely stop stock market bleeding on Wednesday
Stock markets will likely rebound on Wednesday, due to the fact that President Obama is indeed hiring the dovish Janet Yellen as the new Chairman of the Federal Reserve. Stock markets died on a vine yesterday (I was wrong in my prediction), with the S&P 500 (NYSEARCA:SPY) losing 1.23%, the Dow Jones Industrial Average ETF (NYSEARCA:DIA) losing 1.07%, and the NASDAQ 100 (NASDAQ:QQQ) losing a whopping 2% even.
I will admit, I did not expect such a massive stock market sell off yesterday, but in hindsight things always make sense, and yesterday was no exception as investors were definitely spooked over the continued Congressional gridlock. President Obama told Speaker Boehner today to “stop making excuses” about not bringing up a “clean CR” vote to the House floor, and Speaker Boehner continues to insist that the President “sits down and has a conversation with us [GOP]” regarding both the US Government Shutdown and the debt ceiling debates. In short, we are one more day closer to potential Armageddon and Congress has yet to figure this out. Naturally, stock markets sank…
Why I think stock markets will rise on Wednesday though despite all of the drama is in anticipation of the typical stock market bonanza that usually occurs whenever Dr. Bernanke opens his mouth. This time, however, we are due out for a new Chairman of the Federal Reserve, and Bernanke’s successor is not only dovish, she is way dovish. Apparently (according to rumor), she has all sorts of tricks up her sleeve regarding easing, easing, and more easing, so I think Wall Street will have a field day with their new found Fed leader. Whenever the Fed has spoken in the last five years, markets have usually listened, in a big way and usually in a positive way.
In addition to the Fed phenomena and Janet Yellen at the helm, technically we are looking at a more and more oversold situation, with the S&P 500 (NYSEARCA:SPY) nearing its 200 day moving average and holding an RSI at 39.19. The MACD however is even deeper than yesterday and shows no signs at all of letting up, so we might just miss a Janet Yellen spike:
chart courtesy of stockcharts.com
Internationally, European markets finished in the red yesterday and Asian markets were a mixed bag with the Nikkei finishing in positive territory and the Hang Seng finishing in negative territory.
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