Notable Comments from Bernanke's Press Briefing

Major reaction by the markets following the FOMC announcement and Bernanke's comments was a major bid that pushed the market to new highs.

The most significant thing to come out of Bernanke's statements was that the Fed would continue easy monetary policy. That is positive for US equities as interest rates will remain low and the the stock market is certainly a better alternative to grow your money than any interest bearing account.

NOTABLE COMMENTS:

On GDP Projections being lower:
Fed expects weaker number as well, maybe under 2%. But this should only be a transitory phenomenon.

On when Fed will consider Tightening Monetary Policy:
Fed watching to be sure recovery is sustainable. Wants to see continued growth and job creation. At the same time Fed is monitoring inflation. Believes rises in energy and commodity prices are only transitory.
Until these conditions are violated, Fed will continue with easy monetary policy.

On weakening US Dollar:
Dollar fluctuation is normal. The weakened US dollar is the result of an unwinding of the safe haven carry trade that pushed the dollar higher following the financial crisis in 2008.
Strong and stable dollar is in the best interests of Americans and global economy. US monetary policy is aimed at maintaining low inflation, trying to acheive max employment and a stronger US economy. This will generate fundamentals that will help the dollar.

On gas and food prices rising and what can Fed do about this?
Gas and energy price increases due to supply and demand due to emerging markets growth as well as to disruptions in supply as a result of unrest in the MENA region. Not much Fed can do about gas prices w/out derailing growth. View is that commodity prices will not continue up.

On QE2 being unsuccessful:
It was never intended to be a panacea. It takes time, but program has been successful based on gains in the stock market and reduced spreads in the credit markets. Easing financial conditions should lead to better econ conditions based on decades of experience
Easing should remain constant after June

On US Debt and S&P downgrade:
This is nothing new, it is well understood that the United States debt levels are a concern.
It only reinforces that we need to address it. This is constructive.

Watch FOMC Press Conference With Ben Bernanke Today at 2:15pm EST Here

Click here for the latest Fed Posts



Video clips at Ustream

Chairman Ben S. Bernanke will hold press briefings four times per year to present the Federal Open Market Committee's current economic projections and to provide additional context for the FOMC's policy decisions.

In 2011, the Chairman's press briefings will be held at 2:15 p.m. following FOMC decisions scheduled on April 27, June 22 and November 2. The briefings will be broadcast live on the Federal Reserve's website. For these meetings, the FOMC statement is expected to be released at around 12:30 p.m., one hour and forty-five minutes earlier than for other FOMC meetings.

The introduction of regular press briefings is intended to further enhance the clarity and timeliness of the Federal Reserve's monetary policy communication. The Federal Reserve will continue to review its communications practices in the interest of ensuring accountability and increasing public understanding.

Markets Hold Bid

Earnings results continue to be better than expected in most cases. Amazon was an exception as earnings disappointed yesterday afternoon, though the markets showed little reaction.

Markets very bullish after making new highs yesterday and showing continued strength this morning. I like buying the dips. However, I will be waiting for the FOMC announcement at 12:30 EST. The news is being released early to make way for a Q&A session with Ben Bernanke at 2:15pm EST. It will be interesting to see what is said about a potential QE3 or no QE3. One thing is certain, any further easing measures will not be referred to as QE3... In any case, today's announcement has the potential to move the markets and will be the most interesting news of the day...

Levels to watch today on the ES:
Resistance above at: 1346-1347, 1350-1351, 1353-1354
Support below at: 1343-1344, 1340-1341

Assuming there is negative reaction to the FOMC announcement, the 1334-1335 support could come into play...

Where Might the Market Be Headed Next?

Markets pretty much flat to begin this week. I don't expect too much action today, but I do expect that a little bit of a retracement to the downside is coming, at least to 1319-1320. The question is, will we make a slightly higher high first.

Levels to watch today on the ES:
Resistance above at: 1337.50-1338.50, 1340-1341
Support below at: 1330.50-1331.50, 1327.50-1328.50, 1323-1324

Some points to observe regarding the US Dollar:

The dollar continues to make new lows and looks terrible. It has looked terrible for a long time so that is nothing new. But as the dollar continues its weakness, that supports a rise in equities.

The Central Bank of China said publicly last week, that Chinese foreign reserves exceed reasonable levels. "The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars," Tang Shuangning, chairman of China Everbright Group, told a forum in Beijing. China currently holds $3 Trillion in US debt. This new policy would suggest that China could dump $2 trillion of that debt. That would not not help the already weakening global confidence in the dollar. Something to think about...

There is still major support on the dollar index dating back to the lows of 2008, so I expect that the dollar will see a bounce to the upside when that support is tested. Maybe at that point, we will see another sell-off in equities that will simultaneously price in the fact that there will not be a QE3, at least not in the near term...

Shorts Today

It goes without saying that one must be careful with shorts and choose entries wisely when shorting into a bull-market. I am always looking for short entries, but I certainly won't defend them in a market like this one. If you missed the double-top short, you already missed the best short opportunity of the day...

Retesting the February Highs

The E-mini S&P 500 Futures came within one tick of equaling the February highs this morning. A strong bid entered the market after the close yesterday on the heels of very strong Apple earnings ($6.40 versus $5.37 consensus estimates).

The ES is currently pulling back nicely after testing the February high. Part of the weakness comes after Initial Jobless Claims were reported at 403,000, 13K more than expected.

Markets bullish but the double-top resistance looms overhead. I will be looking for a potential pull-back past the 38.2% retracement level which is just under 1320. Today may end up being a light trading consolidation day ahead of tomorrow's holiday. If that is the case, we may have to wait till next week to see any significant pull-back.

Levels to watch today on the ES:
Resistance above at: 1337.50-1338.50, 1340.50-1341.50
Support below at: 1328-1329, 1323-1324, 1319-1320

Market Sees Sharp Gains Following Positive Earnings and Strength in Foreign Markets

Markets saw a bid yesterday afternoon following positive earnings releases from IBM, INTC, VMW, YHOO, JNPR among others. Interesting to see that IBM is actually down now while the rest of the market is up considerably.

European markets also seeing a huge bid with the DAX leading the way up with a 2.8% gain.

ES traded into solid resistance between 1328-1330 this morning, up more than 20 points from yesterday's close. A fiercely bullish move. Normally I would be very confident defending a short above 1328, but with such an aggressive move up last night, momentum suggests we will see continued buying. Such large gap ups are often followed by a continuation higher.

Outlook for today:
Look for a potential sell-off back down to at least 1322 and as low as 1318. From that low, look for a rally back up to the current high of 1328.75. There is a good chance we make a new high from there which will be followed by narrow consolidation trading for the remainder of the day. Thats a possible scenario and that is one way I will be looking to play this market today.

Levels to watch today on the ES:
Resistance above at 1328-1330, 1332, 1334
Support below at 1321-1322, 1318-1319

Housing Data Better Than Expected. Market Showing Minor Strength

Market may have some strength left following yesterday's reversal off the lower 1290s on the ES. Up and down action has been the norm of late. That will change when the largest number of market participants is least expecting it, so be careful not to get over confident in a position in expectation that the market will reverse. Continue to play the chop, but just make sure you don't let a position run against you without an exit strategy.

Could see continued strength this morning, but overall I view the market as weak. I anticipate lower lows on the horizon.

Levels to watch today on the ES:
Resistance above at 1304-1305, 1310-1312
Support below at 1297-1298, 1293-1294

Weakness this Morning Over Fear that U.S. AAA Rating in Jeopardy

Trading volume surged and stocks sold in pre-market this morning as ES sold off 9 points in a matter of minutes as S&P issued negative outlook over U.S. Long-term debt.

In the near-term my bias continues to be short as I expect lower lows. 1319 held as resistance on Friday and I expect shorting into resistance to continue to provide positive returns

Levels to watch today on the ES:
Resistance above at 1306-1307, 1311-1312
Support below at 1296-1297, 1292-1293, 1289-1290

More Downward Action on the Horizon

Market continues to show weakness. As expected, the 1300 level on the ES proved to be a great long entry yesterday. The bounce, however, has fallen short of being something that can be attributed to strength. It was a technical short term reversal off solid support. I expect a retest of the lows to come soon, very possibly today. There remains solid support just below yesterday's lows. I will look to get long again if the ES sells down to 1296-1297.

An alternate scenario that could play out is that we see continued strength this morning. CPI data (excluding food and energy) came in slightly lower than expected this morning resulting in a little buying momentum. If more buying comes in after the open and the ES confirms a move above 1314-1315, that will just delay the continuation of the latest down-turn until next week. As long as the ES does not trade back above 1328-1329, I will continue to consider the market weak and expect a lower low.

Levels to watch today on the ES:
Resistance above at 1314-1315, 1317-1318, 1320-1321
Support below at 1305-1306, 1301-1302, 1296-1297, 1292-1293

Fed Releases Beige Book

Reports from the twelve Federal Reserve Districts indicated that economic activity generally continued to improve since the last report. While many Districts described the improvements as only moderate, most Districts stated that gains were widespread across sectors...

See full report here.

ES Making an Attempt to Retrace into Previous Support

Futures strong this morning with US markets set to gap up. The question to ask is whether or not the prior 3 days of selling were the beginning of the next leg down in the market, or if it is just a negative blip that will be followed by another move back up to test this year's highs. I believe it is the beginning of a move back down below 1300. To confirm this outlook, markets shouldn't see continued strength past the first hour of trading this morning. One of two resistance levels needs to hold today. The first one is the 1319-1320 level which has been tested in pre-market. If that doesn't hold, The second is a retest of the base of the prior consolidation channel at 1325-1326. I will look for short entries at these levels.

Levels to watch today on the ES:
Resistance above at 1319-1320, 1323, 1325-1326
Support below at: 1314-1315, 1311-1312, 1305-1306, 1301-1302

Market Continues Decline After Closing Below Consolidation Channel

The ES closed below the low of its consolidation range yesterday confirming the weakness that it demonstrated on Friday. US markets have since traded lower in the overnight session as we are set to gap down nicely this morning. As I mentioned in the last post, a failure of buyers to push the ES above 1330 yesterday would be a signal of weakness and sure enough, the ES has now traded down to 1310. This is a key level for this morning. If buying comes in after the open and the ES recoups its losses quickly, that would be very bullish. I think the market will be more indecisive, however, and a move down to the lower 1300s is not unlikely.

I am a confident buyer today at 1300-1302. I am a seller on the first move back up to test lower reaches of the past weeks consolidation channel, currently around 1324-1325.

Levels to watch on the ES today:
Resistance above at 1317-1318, 1321-1322, 1325-1326
Support Below at 1310, 1305-1306, 1301-1302

Market Threatens Break-Down Lower on Friday but Does not Confirm Weakness

The ES broke down below the lower consolidation support on Friday after some political posturing about a government shutdown. The weakness was short lived however, as support held at 1319 and the ES closed the day back within its 7 day consolidation range. I remain neutral in my current market bias.

It will be important to see how the markets open today. I will be watching the 1329-1331 price point. If resistance hold there on the ES, that may point to continued weakness on the heels of Friday's sell-off and we could see a move that could take the ES down to 1310. I would consider long entries from there. If the ES moves above 1330-1331, I will expect a move back to the upper levels of the consolidation channel.

Levels to watch on the ES:
Resistance above at 1329-1330, 1334-1336, 1338-1339
Support below at: 1323-1324, 1320-1321, 1314-1315, 1310-1311

IN THE NEWS:
U.S. lawmakers reached a budget deal by the Friday deadline, which cuts spending by $78.5 bln from the President's FY11 budget request. The two sides agreed to cut $13 billion from funding for programs at the Departments of Labor, Education, and Health and Human Services as well as over $1 billion in a cut across non-defense agencies. There will be reductions to housing assistance programs and some health care programs along with $8 billion in cuts to budget for State and Foreign Operations. The question is, are these cuts too little too late?

ECONOMIC DATA THIS WEEK:
Earnings season kicks off this week, with Alcoa reporting today after the bell.

Retail Sales on Wednesday at 8:30am EST
PPI and Jobless claims on Thursday at 8:30am EST
CPI on Friday at 8:30am EST and Industrial Production at 9:15 EST

US Markets Gapping Up This Morning

A gap up this morning puts the ES close to the upper regions of the current consolidation channel. Despite rising input costs, unrest in the MENA region, a slowdown in China, Europe's sovereign debt crisis and the earthquake in Northern Japan, the market remains close to its highest levels since 2008.

The previous Gaps Up from April 1st, 4th and 6th each filled their respective gaps before climbing back up within the consolidation range. Until the market proves otherwise, I will short into resistance at the upper part of the range and and buy the support at the lower part of the range. I will not defend these positions as a move outside of the consolidation will likely be followed by a continuation in the direction of the break-out. If it happens to the downside, it should be on heavier volume than we have seen of late, if it happens to the up-side, it will likely be on low volume.

Levels to watch today on the ES:

Resistance above at: 1336-1337, 1339-1340
Support below at: 1331-1332, 1326-1327, 1323-1324

Market Remains Range-Bound Even With News of Another Strong Quake in Japan

Nothing has changed in terms of the market finding a direction. Even with a spike in volume yesterday morning following the news of another 7.1 earthquake in Japan, the ES couldn't break through the lower consolidation range support.

ES 60 Min Chart Showing Six Day Consolidation Range

I will await a breakout that results in a daily close above the upper consolidation channel or a breakdown that sees a daily close below the lower consolidation channel before gaining confidence in a new directional market move. Trading action in the day that follows will need to see a continuation in the direction of the break-out to confirm the move. If ES sees a confirmed move to the upside, I will look to buy a retracement back into the prior resistance of the upper consolidation trend line. I will do the opposite in the case of a confirmed break below the lower consolidation range.

In either case, I expect choppy markets and at least another round of volatility before a climb to new highs can begin. If markets sell-off again, it will provide a great opportunity to enter swing long positions in US equities.

Can Early Strength Lead to Any Sustained Direction?

US Markets gapping up this morning without any significant news. Chinese markets higher today despite yesterdays rate hike by the People's Bank of China. European markets also higher today.

Since the FOMC minutes yesterday, it seems there are a growing number of Fed members that are acknowledging that inflation is something to be concerned about and more members are leaning against a continuation of easy monetary policy.

I continue to sell resistance and buy support while not looking to defend any position. Until we break out of this low volume, narrow trading range consolidation, I continue to be cautious and neutral overall. The next break-out with high volume in either direction will influence my bias in that direction...

Levels to watch today on the ES:
Resistance above at: 1336-1338, 1345-1346
Support below at: 1331.50-1332.50, 1325-1326, 1321-1322

Gapping Down This Morning

In Europe, pretty much all markets are trading down this morning even after generally solid PMI Services readings. Moody's joined the bandwagon and downgraded Portugal's debt. Japanese markets are down more than 1% with TEPCO shares leading the way down -18% after announcing they would dump radioactive water into the sea.

US markets gapping down this morning. For weakness to continue we will need to see a confirmed move below 1320 on the ES.

A note on the anemic volume levels we have seen over the past two weeks: The last time volume was this low during a non-holiday period was just before the market crash in September of 2008. Certainly something to think about...

ISM Non-Mfg Index data due out this morning at 10:00 EST.
FOMC Minutes at 2:00pm EST

Levels to watch on the ES today:
Resistance above at: 1328-1329, 1333-1334
Support below at: 1320-1321, 1316-1317, 1309-1311

Continued Anemic Trading Volume a Sign of Negative Things to Come?

Market continues its lackadaisical maneuvering and shows that traders are unwilling to exemplify any conviction whether bull or bear. I don't know that I have ever seen such a dead market following a volatility laden correction and unwavering global unrest (unrest as in the Japan situation and MENA instability).

Typically, seeing an unwillingness of sellers to step in after retracing into prior support like we have seen in the past week, would lean me toward a bullish frame of mind. This type of consolidation is often a sign that a breakout is imminent. But it works both ways and buyers are also failing to bring the market higher. I mentioned a key resistance level in the post from March 30th. The ES has failed to confirm above that level for the fourth consecutive day on low volume.

Looking back, the last time volume was this low during a non-holiday period was just before the market crash in September of 2008. Not a great thought if you are long the market. I did say in the previous post that I like buying the dips, and I will still considering doing so, but only after support has confirmed so that I can put a tight stop on any long positions. I would not defend any long positions right now.

You really have to entertain both long and short positions and look for the best entries so that you can use tight stops. Market could break in either direction. However, there are new warning signs that a sell-off could be on the horizon:

• Crude Oil (CLK11) settled at a 30 month high today (Monday) at $108.24
  
  
• Bernanke has acknowledged that commodity prices may create a transitory or temporary rise in inflation. He also said the following:
  
  “We have to monitor inflation and inflation expectations extremely closely because if my assumptions prove not to be correct, then we would certainly have to respond to that and ensure that we maintain price stability.”
  
  The fact that Bernanke is acknowledging that he could be "wrong", shines some negative light waves for the trading community to digest.
  
  
• TEPCO has authorized the dumping of more than 2.6 million gallons of radioactive water into the ocean. Listen to the explanation that a TEPCO spokesman gives:
  
  "Filtering radiation from the water would take too long and its release will help protect equipment in the buildings housing the reactors," said Junichi Matsumoto.
  
  Is this action in the best interests of preventing further danger or is this in the best interests in saving money by preventing further damage of TEPCO equipment??
  
  I don't know whether the radiation levels that are being added to the sea pose significant long term threats to the ecosystem or not (some "experts" say no), but the fact is that the containment of the situation at the Fukushima Dai-Ichi nuclear station continues to be a problem and the lack of positive news coming out of Japan is certainly not a good sign.
  

The reason I bring up these signs of negativity is just to present the case that we could see another dip down before officially returning to the bullish ways. In fact, I fully expect a bit of a shake-out via choppy action before the markets go on to make new highs. I do maintain my belief that we will see new highs this year, I just don't think the timing is now to jump on the long bandwagon...

Considering the Week Ahead. Optimism Wins.

The unemployment data from last Friday can only be looked at as positive as the US added 216,000 jobs and the unemployment rate dropped to its lowest level in 2 years falling to 8.8%. Of course if you look deeper, you will see that this number is not entirely accurate; government statistics do not count folks who are no longer looking for work. To get a better idea of what that number represents, there have been over 8 million jobs lost since the recession began and those jobs have yet to be replenished.

Regardless of the underlying data, the reported employment situation is positive and that is what is most important in the short-term.

Current Price-Point of US Equities
We have reached critical retracement levels since the market reversed over two weeks ago and no selling has returned. Amidst a world of uncertainty as well as a return to rising oil prices, sellers have yet to step up to the table. Considering this information, I have to favor an outlook of further upside before anticipating that another sell-off is likely. Barring any new cataclysmic news, I will be looking to buy any dips into support.

The Dollar
It will be interesting to watch the US dollar going forward. So many people express fearful views that the US dollar will continue to depress further. And, hey, deservedly so. However, its all about timing with the decline of the dollar and its not going to happen overnight. Perhaps it will one day be worthless, sure, but right now, I see a likely rebound coming, at least in the short-term. Technically, it is oversold and fundamentally we are seeing positive economic data flow out of the US. That combination can only suggest a rebound in the dollar is likely. The ISM Non-Mfg Index will be reported this Tuesday at 10:00AM EST. A positive announcement should only help the dollar. Also to watch, FOMC Minutes Tuesday at 2:00pm EST and Jobless Claims on Thursday at 8:30am EST.

The dollar and the stock market don't exactly share a perfect inverse relationship, but looking back to the summer of 2010, you can see that the dollar has been consistently declining while the stock market has been on the rise. In that regard, it will be interesting to see if the equities markets turn down in reaction to a rise in the dollar, if that rise does happen.

Market Up Again Following Employment Numbers

The employment report showed an all-around improvement in the labor sector in March. Total nonfarm payrolls increased by 216,000 in March after adding 194,000 jobs in February, handily beating estimates. Markets in Europe and most of Asia are also up (Japan is down).

Although employment report and price action is bullish, I remain cautious. We'll need to see continued strength after the first hour of trading to confirm the bullishness... Lets make sure the bullish action this morning isn't an April Fools Joke! :)

Levels to watch on the ES:
Resistance above at: 1330-1331, 1334-1335, 1337-1338
Support Below at 1326-1327, 1321-1322, 1317-1318