By: Elliot Turner
Over the last week, volatility has come back with a vengeance. We have a host of new and old buzzwords moving this market in violent swings every which way: iPad, “extended period”, State of the Union, etc. Coming up in the next hour, we have perhaps the most significant news-based event of the week–Helicopter Ben Bernanke’s cloture vote in the Senate set for 3:20 this afternoon.
Considering there are only two possible outcomes at this point, it’s worth quickly running through the “if…then” setup for the post-vote trade. The question of whether Bernanke will be confirmed or not has been weighing heavily on this market. Uncertainty with regard to the future, generally speaking, weighs on the market. This particular variety of uncertainty is dangerous. When market participants do not know what to expect with regard to the future course of monetary policy then they do not have a clear picture as to how best to deploy capital. Should the vote affirm Bernanke, it’s very possible that we can see a “relief rally” take hold in the market.
If, on the other hand, the Senate were to vote against Bernanke’s cloture, then an even greater amount of uncertainty would loom over the market. This is a hypothetical that not many want to contemplate; however, should that happen, I will look just about anywhere for short setups.
So far today, the financials exhibited good relative strength. This is a sector that will be front-and-center on my radar, along with some of the oversold commodity stocks.
Best of luck this afternoon and hope for the best with Helicopter Ben’s vote.
