And the Dow jumped by almost 300 points.
Now, the taper itself is small to start – just a $10 billion reduction for the month of January. But the announcement was coupled with a pledge to keep the Fed funds rate at zero beyond the 6.5% unemployment threshold.
As a result, two things collided in the last 90 minutes of yesterday's trade: a clear indication that the economic recovery was strengthening and a classic "short squeeze," which merely added fuel to the fire.
As we approach the end of the year, that means the "Santa Claus rally" may have a bit longer to run.
But longer term, the market is now faced with less artificial stimulus next year and a gradual return to a market where direct pressures influence its direction.
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.