Did Bernanke make a mistake by not tapering? I don’t know and frankly it’s not my job to try to figure it out. My job is to trade what is in front of me and I think I am going to get to experience a mini dot com bubble. Perhaps it won’t be as epic, but grand enough for me to one day brag to my kids about the euphoric Bernanke bubble that made me rich (I’m using hyperbole, so don’t take it to mean I will be irresponsible).
It seems that by not tapering, the Fed has only postponed the inevitable. By putting it off however, stocks are now poised to go much higher and in a hurry. In order to make year end numbers, funds that are under-performing (recall that people have been calling a top since January 3rd, the second day of trading this year) are going to be the fuel to this next leg up that has a good chance of being pretty amazing. Bears have been arguing the lack of volume as a divergence for years and have been hurting because of it. Now as people begin to try to play catch up, bears will finally see the volume they have been waiting for to confirm this bull market. Euphoria will kick in, everyone will be a genius stock picker and life will be good. Unfortunately, this kind of buying frenzy I am anticipating usually ends badly (but we can worry about that when and if it comes).
So am I advocating you start putting all of your cash into the market tomorrow? No, obviously not. The one issue that could derail this “party” is our deranged government that will surely create drama over the budget crises. Ironically, that appears to be one of the reasons that we got zero tapering yesterday. What I am suggesting however, is that you continue to buy the dip, don’t short every down tick, and ride your winners. A stock will not drop just because it has gone up “so much already” or because “the PE is too high.” Get that out of your head. The market does not understand the concept of gravity.
Most importantly, don’t be late to the party. You don’t want to be the one telling your children or grandchildren that you called the top perfectly by being the last one to buy.
Feel free to respond with your thoughts by replying to my twitter handle (@sassy_spy). I would especially like it if more seasoned traders responded since I was most likely chatting with some crush on AIM in the 90’s while you were ringing the register with AOL’s stock.