Heads or Tails Mr. Bernanke?
The SPX declined -7.5% from the 1687 5/22/13 symmetry high to 1560.33, and has now advanced +7.7% [low to high] to a 1680.19 high. The initial leg down from 1687 to 1598 [-5.3%] reversed off the 50DEMA and made a 1654 high [+3.5%] on 6/18/13, which was the 51.6 month Pi time symmetry [6 x 8.6].
From 1654 the SPX declined -5.7% to the 1560 low on 6/24/13 and has reversed +7.7% so far. There was also Pi symmetry on 6/23/13 [Sunday] which is 1570 CD`s [4.3 years or .50 x 8.6] from the 3/6/09 667 bear market low. In a previous commentary I mentioned the significance of the 6/18-6/23 Pi time zone. The next significant symmetry is in early August, and I will comment as we get closer to that time period.
Bernanke`s June 19th hawkish tapering statement was obviously not taken “market friendly” as yields spiked and the equity market declined. The Fed was clearly surprised at the immediate reaction and they essentially “choked” – as no less than 7 Fed Regional Presidents were out the following week jawboning in order to calm the markets.
It obviously worked as the SPX made the 1560.33 low on Monday [6/24/13] and has now made a new bull cycle high close Friday at 1680.19. The advance was accelerated 7/11 [Thursday] as the SPX gained +1.4% following Bernanke`s statement after the close on Wednesday. His simple explanation of his what is essentially “I will continue to manipulate” comment is that he reconfirmed the Fed Put, and said that “I think you can only conclude that highly accommodative monetary policy for the foreseeable future is what`s needed for the economy”.
Many would say he now obviously has a credibility problem versus his June 19th press conference, but the market players just want to hear that “bad is good, and good is bad” again. He obviously “choked” on the recent stock market mini decline and rise in yields, but also said that he would push back if that were to continue.
The SPX was +3.0% on the week, which is the best weekly gain since the four day New Year week ending 1/4/13. However, it was one of the worst day trading weeks in the SPX this year, because in addition to the gap-up openings 3 days last week followed by flat-line price action, the other two days that opened in-line flat-lined most of the session, with the exception of some MOC mark up price action.
There were some Volatility Band trading opportunities but weak contra moves, so with the exception of a few Trading Service Focus List stocks, it was a lean trading week despite the Bernanke mark up. Treasury yields declined last week, while the USD was -1.9%.
We have seen earnings estimates and guidance slashed significantly which makes it easier for the companies to report so called “better than expected” results and perpetuate the managed earnings game, which is totally divorced from the reality of what is going on – just like we have seen in the Jobs Data, or I should say the “Part Time Employment Report”.
Bernanke testifies to Congress this week, so hopefully we will get some trading travel range to work with other than gap openings and then flat-lining price action into the MOC session. If he continues to waffle like he has the last couple of times, and the rest of his Fed members continue to be splintered, the market could get antsy again.
The SPX is up 7 straight days, and obviously S/T-O/B. It has advanced 11 of the last 13 days off the 1560.33 low with the 5 RSI O/B at 90.30. You can assume that the 1687.18 intraday cycle high magnet will get taken out, but only as a trader who cares with the current negative risk/reward.
