| Investor Education: Euphoria Wears Off, Market Reality Hits |
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inthemoneystock
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Location: New York City, New York
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| Investor Education: Euphoria Wears Off, Market Reality Hits |
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The markets surged dramatically higher last week, following the avoidance of the catastrophic Fiscal Cliff. A deal was struck in Washington D.C. to keep taxes the same on those making less than $400,000 and families making less than $450,000. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) had its best week in over a year and the average investor and media breathed a sigh of relief.
While last week it seemed as if the world was saved, this week the market is on pace to have its second down day in a row. The SPY is trading at $145.32, -0.60 (-0.41%). So why is the market beginning to sell after such great news last week? There are multiple reasons which will be explained below.
1. The market had a dramatic move to the upside of around 5%. It is common see a pull back after such a big move up.
2. The Fiscal Cliff deal struck in Congress only dealt with the tax side. The spending cuts were kicked two months down the line. The spending cuts are arguably the bigger factor to the market as they will influence future growth dramatically.
3. The U.S. will hit the debt ceiling in two months. This means the United States will default on the debt if the ceiling is not raised. A major battle is brewing between Republicans and the President. The Republicans are going to be demanding huge spending cuts if they are to vote in favor of increasing the debt ceiling. This will likely be the final stand and even more important to the stock market. Remember, if the debt ceiling is not raised, the most powerful country in the world would default on its debt.
4. The Federal Reserve has signaled they may stop printing money by the end of 2013. The QE policies of the Federal Reserve have arguably inflated the stock market for the last four years. Think of this as a drug addict (the stock market) that is addicted to drugs (QE). As the year progresses, this will become more and more of a worry to the markets.
The bottom line is this, it appears more and more that the pop from last week may be short lived. It is very possible we could see more downside as the second Fiscal Cliff nears. I am looking to short charts that have PPT Strategy setups in them.
Gareth Soloway
InTheMoneyStocks
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Tue Jan 08, 2013 6:16 pm |
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payment proof
Senior Member
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Did you write this yourself?
I ask because the admins don't like us copying/pasting content from other sources.
See Proof. You can make free money online.
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Wed Jan 09, 2013 4:05 am |
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payment proof
Senior Member
Cash: $ 408.30
Posts: 2032
Joined: 16 Jan 2011
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I agree the points in the post are very valid and it's an extremely well written post.
Thanks for verifying it wasn't a copy/paste coaster. 
See Proof. You can make free money online.
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Fri Jan 11, 2013 1:46 am |
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groodscom
New Member
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Joined: 20 Mar 2012
Location: Omaha, NE, USA
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Sorry for the newbie question, but what do you mean by the government will "default on their debt"? Isn't more like missing a payment thus lowering their credit score?
I sold off a lot of my stocks a month ago and I thought it was a bad move due to the last few weeks of them bouncing back. I was planning to wait until the debt ceiling was raised or not before getting back in. This could be a good buying opportunity.
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Thu Feb 07, 2013 2:51 pm |
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littleroc02us
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I too was looking at this post and believe it is valid. Sometimes it's hard to tell when it is so well written.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Thu Feb 07, 2013 3:52 pm |
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groodscom
New Member
Cash: $ 0.65
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Joined: 20 Mar 2012
Location: Omaha, NE, USA
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Good advice. This is the first time I've made this mistake. The good news is that I still made a lot of money.
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Sat Feb 09, 2013 5:23 pm |
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