I believe Bullard has been designated to talk for the Fed and represents the views of the majority. In September, he said inflation was too low and sure enough no taper on Sep 18. I think Bullard is also instrumental in all the taper talk. The taper talk is used to talk down the market from becoming a bubble while the Fed has no intention of tapering. The USD has returned below the 200dma indicating the currency traders think there will be no taper yet.
In the meantime, SPY may correct below the BBd under taper worries nevertheless. GCPI will fall again this month to perhaps 1.2 so no worries of taper until 2.0.
I see 3 strategies:
1) If SPY touches the bottom or -1 of the BBd, stay cash until it hits the 200dma.
2) Once -2 to -3 below the BBd (‘stretched’), SPY can be bought upon exiting the BBd.
3) If SPY hits the 200dma (late Oct-Nov) , SPY can also be bought.
So there could be 2 rallies in Oct and then Nov/Dec. Or 1 bottom in November and a rally until Dec 18.
See link below-
http://www.bloomberg.com/news/2013-09-26/where-is-the-panic-over-deflation-.html
Where Is the Panic Over Deflation?
A quick point worth noting from this morning’s gross domestic product report. The report is largely a yawn, containing few interesting revisions to earlier estimates of economic progress in the second quarter. But there’s one number that caught my attention. The Bureau of Economic Analysis has revised its estimates for the personal consumption expenditures price index. It’s an important number, because this is the index the Federal Reserve targets. And remember, it’s aiming for inflation of 2 percent.
I won’t overstate this. It’s just one quarter, and it’s evident in just one index, and even when I cherry-pick this interesting number, prices aren’t really falling very quickly. The PCE deflator fell at an annual rate of only 0.1 percent in the second quarter.
Credit Flow Investor 