In this case, it means Mr. Bernanke is there for Wall Street. Main Street is protected when Wall Street is protected, and Fed Bernanke is on a mission to let the markets around the world know that all is well, even when it isn’t. I know many are turned off to this reality, and I really can’t blame anyone who is, but the bottom line is we’re in an election year and there’s no way the Fed is going to turn its back on Wall Street. There’s simply too much at risk. The Fed came away from the usual two-day meeting today, with one Fed Governor dissenting, but with his statement of defense solidly in place for the world to hear.
The market didn’t implode as it would have if the news was different. It held its own, even near overbought. There’s nothing like the head money-machine printer promising more if, and when, needed. How much can he print, and when does the madness stop? No one knows, except the mighty Fed, himself, but for now, he obviously feels the risk is toward deflation, and wants no part of it. If it happens years from now, and not on his watch, it will all be someone else’s problem. That apparently doesn’t affect his sleep at night. He only cares about the moment, and in this moment, he’s promising the market many good things to come from the printing press.
The problems on a global level are escalating. How do we know this? You listen to the words of the largest leaders economically. Company after company is coming out with the same words of extreme caution about what they see in the future. First it was FedEx Corporation (FDX). They said things were slowing much more rapidly than had been anticipated. They warned the problems were from here at home as well as overseas in Europe. Not just a European problem anymore. Then came Adobe Systems Inc. (ADBE) and Procter & Gamble Co. (PG) this morning. Both said the same exact thing. That the European problem was getting worse, but so were our problems here at home. Warnings about the future are getting more and more prevalent now. It’s not what we need to be hearing as unemployment is only going to worsen, with such news coming out almost daily, it seems.
Jobless claims will probably move higher overall in the months to come, unless someone has an idea no one else seems to have at this point. We need to see leaders lead, but we’re getting the opposite. We can hope this trend changes, but the economies of both here at home and in Europe seem to be falling down rather quickly. All eyes will be watching the next earnings season very carefully for further insight. If the trend continues as it seems to be doing now, it seems the market will have to surrender to the bears. We shall see down the road.
This market is very complicated, folks. Fundamentals are not matching the technicals at this moment. The fundamentals say one thing, but the technicals are painting a different picture, thus, it says to be very nimble when playing. You don’t want to get aggressive at any time, whether you’re a bull or a bear. Too much whipsaw to get excited about doing too much as you’ll make bad decisions on how to proceed.
We have strong support at the 50-day exponential moving average at 1338 on the S&P 500. We also have that strong gap up from S&P 500 1300, which backs up 1338. Only if the bears can capture 1300 on a gap down will they be able to try and take out the line in the sand for the bulls at 1265, which is the long-term up trend line of the March 2009 lows. It won’t be easy. The wedge measures to approximately 1415, and that’s still a possibility here. No guarantee, but that’s the top of the wedge, thus, it’s in play. Getting through that will be tough for the bulls as it’ll likely set up negative divergences. We may simply be range-bound for some time to come.
It’s slow and easy with some exposure, but nothing aggressive.
Peace,
Jack
