Another possible rate increase has almost been priced into the markets judging by the sideways trading in the past few weeks. Nevertheless, the the markets will continue to rally regardless of the fed. Don't obccess over the fed and dollar. The key is earnings and econ stability. the greatest gains in the market have yet to be seen. The nasdaq will gain 1000's of point in a matter of months as a runaway heard mantality takes control like what happened in 1999-2000. If you buy at the base of the setup now you can reap huge rewards selling at the top in a few years.
i tend to agree with Stock_trad3r that one should not obsess over the Fed and rates because the key is earnings and economic stability. I'm still concerned, however, about the quite long term effect of central banks wanting to reduce their dollar exposure. I believe there is a significant probability of this affecting us in 2006 (hopefully only in a small way) because we have backed ourselves into a corner with our large debt that must be financed. If this really is becoming a problem, we won't hear a word about it from the Fed. But if it is going to become necessary to raise rates to support the dollar, my guess is that Bernanke will favor doing so sooner rather than later. Treasury bonds would fall (are we beginning to see signs of that in anticipation?) as yields must then rise. This would certainly put downward pressure on the markets. I'm decidedly not making a prediction here, but only suggesting that we all recognize at least the possibility of this occuring, and not dismiss it out of hand.
This is exactly the scenario around summer of 1999 when I was trying to short an over-bought market. It kept going higher and higher. History could repeat itself. At this juncture though, it would take a strong US dollar and oil below $50 to pull it off. This could happen....if crude breaks $55 with conviction, there is little support till $50 or so. Inflation would moderate, and we would be back to a "Goldilocks" economy once again. It won't last though....this business cycle is getting real old....and one big event could set the stage for the next bear market.
I think it all comes down to the ten year yield. If the ten year is 5 and up, then the market will be in bear market mode. If the ten year is approaching 5, like it is now, then we will see a nice correction. You will see what I mean when you place a chart of the TNX up alongside a chart of the S&P...
I know how stocks work dammit Here is the goog prediction I made awhile back using my TA skills Called the cup and handle on Dec 20 th broken out a whopping 30 points since stocks will rally huge this year
lmao. We're in for a correction. Rational people won't risk their chips when their up so big (especially those who have rode this market for years and can get capital gains tax treatment). The wheels are already in motion.