In recent days our friend Ben Bernanke has given speeches indicating that the easy money might be coming to an end. The market has not taken this well because it was happy knowing that the Fed has "its back". But eventually the training wheels had to come off.
Mr. Bernanke is signaling a reduced level of buying at the end of this year and a complete stop by sometime in 2014.
I am somewhat of a contrarian here in that I think this is helpful. Finally, I feel like the economy can get off artificial respiration. The Fed has done what it could and now it is time to move on.
Not everyone will feel this way and I am looking for more hand wringing as the market heads lower over the next few weeks to a month.
We have some economic data upcoming (Q2 GDP out on 6/26 and Personal Income on the 27th) and my guess is that, while these numbers may be weaker, it will give the market a chance to catch its breath and begin building a base.
For me, the Fed pulling back on their policy is a good thing. Let's hope that in the long term the market agrees.
Technical View: Where Are We Now?
Looking at the chart of the S and P 500 above you might be distraught. This is a clear breakdown and it moved quickly below its 50 Day moving average. The question is, of course, how much further? My take on the chart right now is that the price action has moved below the 50 but is still above the longer 200 day moving average trend line. If it drops below this I will be more bearish but for now I still think of this as a correction from the S and Ps recent market highs.
When people talk about the markets you may hear the term "oversold". Technically this means that a lot of the selling has been done as it outside the normal range of market behavior. When a market is oversold you can look for some of the selling to slow down and, perhaps, have buyers appear. While I can never be guaranteed that this will happen, one technical indicator I use to give such insight is the % of stocks above their 40 day moving average. When the percentage gets very low it is a sign of many people dumping stocks without possibly thinking long term. Here is a chart of this index: 
15 is a pretty low number here. I don't expect a snapback tomorrow but I do expect a slight easing in the selling pressure shortly. We can then evaluate and see what the buyers are going to do.
What's Next For the most part I am just staying patient here and watching this pullback. My gut tells me this is a correction, although harsh one, that will help build a base and potentially higher prices going forward. In short, I am not running away from the market just yet. Another aspect to the Fed's potential new policy is that we might see higher interest rates. I am watching for these spikes as it might cause me to choose fixed income funds that are less hurt by rises in interest rates. I expect in July we will see where this goes and whether I was right or not. Look forward to any questions. | 
