The stock markets are rebounding today, after the European debt crises eased, just as I mentioned would happen yesterday. To the world’s surprise, Japan agreed to buy Europe’s financial aid bonds. This is clearly a sigh of relief, especially since Spain and Portugal are next in line to issue debt. Next in line for the markets are earnings, which I believe will be stellar, much better than expected.
The longer term outlook continues to look great for stocks as the Federal Reserve’s easing program continues, interest rates remain low and earnings will likely be stronger than expected. In the short term, the market is over-bought and in need of a minor correction, maybe 3 -5%. However, it could be working it off with its sideways movement. As earnings are announced I expect stocks to rise in response. However, expect the overdue correction once earnings season is over.