For a number of years the market would usually rally when Fed chief Ben Bernanke had something to say. Lately, the pattern has changed and we are seeing a negative reaction to Dr. Bernanke, even though he continues to talk in a market-friendly manner. The problem is that he no longer has the keys to the printing press and can't continue to provide the flood of liquidity to which the bulls have become addicted.
The market sold off hard after Dr. Bernanke's comments and now the SPDR S&P 500 (SPY) is working to regain its 200-day simple moving average. As I have commented before, quantitative easing programs have given the market so much buoyance in the past, but we don't have it this time. The bulls' big hope is resolution of the fiscal cliff crisis but even then we still face major worries about slowing earnings.
I don't want to sound overly negative, as the market could find its legs and push us up a bit more, especially during the thin trading around Thanksgiving. On the other hand, the big bounce we had was widely anticipated and many of those who played it do not intend to stick around for long especially if the recent gains start to erode. I don't see much to buy anyway, so we'll just wait and see how things develop from here. Hopefully, we'll have trading action in small-caps to keep us occupied.