Here's what's next for stocks

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Why isn't the market rallying more? I've heard this several times since Janet Yellen's uber-dovish speech to the Economics Club of New York.

I'm a bit baffled by the question. The S&P has risen nearly 20 points today and is now at a post-recovery high.

What else do you want?

First off, one of the reasons the market rallied in mid-February was because everyone thought central banks would be more dovish on the global slowness. That's exactly what has happened.

More important is the psychological impact of Yellen's comments. This is a shot in the arm for a market that is modestly overbought and oversold.

Most investors just want the bigger picture. Most average investors sitting in mutual funds just want to be assured that they're not going to be scared to death and go back to new lows in the next month.

Yellen's comments have made this much less likely.

What happens from here?

1) Lower volatility. The earnings picture is not pretty, as I have emphasized. But, the cause of much of the recent volatility has not been earnings, it's been the Fed. The Volatility Index is collapsing, poised to close near its lows for the year.

2) The dollar rally is likely over.

3) The pain trade has now changed, from lower to higher. The Fed is again putting a floor under the market. You can argue about how much higher stocks go, but this is like the old Bernanke put, only now it is a Yellen put.

4) It will not likely be a growth rally. Global uncertainty reigns. The dollar no longer rising is good for short covering in materials and energy, but nobody is rushing to buy these sectors for long-term investing, not until supply and demand get closer together. Investors still love dividends, so telecom and utilities are not going anywhere. And banks will still have trouble rallying with lower rates and a flatter yield curve.

Of course, there's lots that can still go wrong, principally the global economy. But Yellen's speech made it clear that: 1) she is in charge, 2) she is more dovish than ever, and 3) if things fall apart, they won't hesitate to go back to the old Fed and cut rates again, buy bonds, or do whatever it takes.

  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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