The balance sheet of the Federal Reserve increased +$55 billion this week to $3.45 trillion. Over the next six weeks, it will expand by another $100 billion to $3.55 trillion. It is on its way to $4 trillion.
While it takes about a week for the Fed to add $55 billion to the balance sheet, the Bank of Japan’s balance sheet increased by +$53 billion just today.
European governments are becoming less austere as their economies are emerging from recession.
A 20%+ rise in the S&P 500 year-to-date offers a powerful indication that synchronized global growth and global easing of monetary conditions is a positive for stocks. While 3Q earnings may be underwhelming and the earnings outlook lowered, it is unlikely the stock market will collapse as long as the above conditions persist.
One of the most important lessons of investing is staying with the trend. Anticipating the end of a bullish trend often leads to early exit and significant opportunity cost/missed profits. Using a moving average crossover provides a steadying influence on investing behavior; keeping investors in major bullish moves and avoiding major bearish moves.