PFS Group

While higher stock prices are often cited as the biggest beneficiary of the Fed?s several rounds of quantitative easing (QE), a lesser cited beneficiary has been overall market volatility and the credit markets. With each round of QE and/or ?Operation Twist? we?ve seen measures of financial stress in the credit markets contract.

Energy prices have collapsed with unwinding of massive net-long positions. Weak demand and rising supplies also weighing on the sector. Slide in prices puts debt of certain issuers at risk of default. Until we see signs of stabilization in energy credit markets, bottom to remain elusive

Given how extended the markets are and the near uninterrupted run since the mid-October lows, the recent Hindenburg Omen signals on the NASDAQ and Russell 2000 on Black Friday are likely warning of a coming pullback.

Since the S&P 500 bottomed at 1820 on October 15th, it is up roughly 12.5% and has seen only 6 down days in the last month. According to trading desks, steady growth in the U.S. and China, better-than-feared European economic data, and accommodative global central banks are the main causes for driving the market higher. Other bullish supports are an increase in foreign buying of U.S. equities and corporate buybacks.

How the markets behave in the coming weeks will go a long way to help determine if the September-October correction was the start of a new bear market or just a normal correction in a bull market. Chris Puplava provides a detailed outlook

It seems we can't go a week without someone predicting the end of the world and stirring up everyone's fears of a market meltdown. These apocalyptic warnings are becoming routine and the sad thing is that it does cause the squeamish individual investor to run for the hills and liquidate their investment portfolio.