Happy Wednesday, ladies and gents, and what a Wednesday it was. While there were other things going on, pretty much all eyes and ears were on Ben Bernanke, waiting for a glimmer of clarity regarding his plans to taper off the Fed's QE efforts. We'll take a look at some of that other stuff, but don't worry - I'm aware that what you want to hear the most about is today's news from the Federal Reserve and how it's going to affect the market. [Spoiler alert: Good news doesn't always lead to logical results.] Housing Starts & Permits Getting Sluggish We mentioned to you in yesterday's newsletter how August's housing starts and building permits would be published today. Well, while they weren't awful, they were somewhat disappointing. Economists were looking for a pace of 910,000 new home starts in August, and we got 891,000, up from 883,000 in the prior month. These same pros were expecting permit requests to reach a pace of 943,000, and we got 918,000, down from 954,000 in July. Let's call it a wash. Thing is, the change from one month to the next isn't all that telling. Neither are how accurate the forecasts were. What we really need - what you really need - is some perspective on the data, and that can only be provided by a look at the bigger-picture chart. Fortunately, your friends here at the SmallCap Network have the ability and the willingness to provide that chart. As you can see, while things could have been worse in August, there's still something of a dark cloud hanging over the housing market. It's possible today's decision from the Federal Reserve to do nothing could actually spur housing again. Interest rates fell more than a little bit on the news. But, with the ten-year note yield still at 2.708% (down 0.145 today), home buyers are going to need a little more help than what they got today. Then again, if there was ever a day to not use as a basis to form a conclusion, today's it. Keep reading. Taper? What Taper? Well, I'll confess I'm surprised (though not shocked) Ben Bernanke and the rest of the Federal Reserve's governors decided to stay the course and keep on buying $85 billion worth of bonds every month, thus stimulating the economy. We've got to wean ourselves from the drug eventually, but it doesn't look like that's going to happen anytime soon. I don't know what you heard in the Fed's assessment, but what I took away from the Fed Chairman's speech is that the QE program will last at least through 2014 and into 2015. That's good. It may not be healthy for the ultra-long-haul, but if it's what keeps investors buying, then it's good news for us investors. Just bear in mind the plans Bernanke described today were no less open-ended and subject to change than any of his other public assessments were. With that being said... The market can be a funny beast sometimes, especially when it's being pushed around by sentiment rather than fundamentals (like it is now). Ever heard the phrase "buy the rumor, sell the news"? Yeah, it's a cliche, but it became a cliche for a reason... because it happens more than occasionally. The news from Washington today was superficially good, and traders initially celebrated it with a hardy round of stock-buying. In some ways though, I can't help but wonder if the only thing today's chat with Bernanke did was flush out the last of any lingering, pent-up bullishness and create the perfect scenario to kick-start a long-overdue pullback. I'll admit there are a couple of problems with the premise. One of them is the fact that the S&P 500 as well as the Dow Jones Industrial Average both busted through technical ceilings and reached record highs today. Meanwhile, the NASDAQ Composite continued to march into multi-year high territory. One of Wall Street's long-standing trading axioms is "buy new highs", which theoretically means today's a bullish clue. Another problem with the top-out theory is the simpler fact that investors got the news they wanted, which could mean several days' worth of bullish traction. On the flipside, I already see a couple of bearish red flags saying today was something of a blowoff top... the proverbial last hurrah for a rally. One of them is the S&P 500's Volatility Index, or VIX. I know I've been talking a lot about the VIX lately, but it's been worth keeping tabs on. Though it's been uncomfortably-low of late (which is unhealthy for stocks, broadly speaking), it had yet to reach what you might call a rock-bottom floor where it reverses upward, accompanied by a bearish reversal from the market. Well, the S&P 500's VIX finally hit a major support level today, and promptly pushed back up and off that floor. What's conflicted about the upward reversal clue from the VIX is that we didn't get a corresponding downward reversal from the market... at least not in a meaningful sense. We closed off the market's highs for the day, but stocks still closed quite bullishly. The only explanation I can offer is that the VIX and the market's stock indices don't necessarily jive minute-to-minute. It may take until Thursday for the market to actually catch up with the VIX. Thing is, it doesn't matter. The VIX - which usually leads - has already dropped its hint. The other hint that today may have been a near-term top: Stocks are now up nearly 6% since late August thanks to today's big jump. There have to be more than a few people ready to take profits here. [This goes back to one of my ongoing lamentations that bulls rarely pace themselves. Had we just made a solid but not excessive gain today, and another one tomorrow, nobody would have cared. When you set off fireworks, though, it attracts the attention of people who take profits at the drop of a hat.] And on something of a side note, reaching a new high today could just as easily be a pullback catalyst; the bears love to strike when it's least expected. Remember, though stimulus is bullish, the reason we need a stimulus in the first place is because the economy is weak.... not strong. That factoid hasn't mattered in months, but stocks can't evade reality forever. The best advice I can give you here is to do nothing until tomorrow. There's just something not right about the news and subsequent action today. We know the initial reaction to the news was wildly bullish, telling us Mr. Bernanke caught most traders off guard. The problem with knee-jerk market reactions is, once traders have time to rethink things overnight (they didn't have time to think today), they could completely change their minds. At the very least I can see the rally taking a breather after today, and it's possible Wednesday's surge burned up all the bullish fuel we had. Again - and I can't stress this enough - any pullback would only be a short-term correction. We remain in a long-term bull market with or without the Fed's QE program, and any dip is a buying opportunity. We'll talk about trade-worthy bottoms when and if the time comes.