23 Aug 2021, 10:40
The major news last week was the release of the Federal Reserve Meeting Minutes. In the Minutes, the Fed stated that it could start tapering its bond-buying program as early as the end of this year. This is perhaps not what most investors would like to hear. Simply speaking, it may reduce its stimulus measures. The stock market rally since the March 2020 crash was largely due to these stimulus. And taking away these stimulus, is like ripping a carpet off their feet.
On the day of the release, the Dow Jones Industrial Average dropped by 380 points. Personally, we were not really bothered by the news. On the contrary, we were not surprised by the drop. This is because stocks were near their resistances. In the S&P 500 index chart above, you could see the index hitting the blue line resistance on the day before the release of the Meeting Minutes, hence, this caused a 3-day slide. However, rather than worry about the drop, we caught the index bouncing off the black channel support line and managed to take this opportunity to buy some more stocks.
As of now, we have to be prudent and observe the stock market more closely. We do not think that this market could run on stimulus steroids forever. If there is a tapering expected in September, we could see a larger down wave. However, there is no need to be large-scaled panicky. In any case, we can buy stocks at the cheap again.
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