Rally Fades After Bernanke Speaks

Even though FOMC Chairman Ben Bernanke’s comments on Monday were defensive of ultra-loose monetary policy the equity markets still could not muster any momentum afterwards and pulled back from its session highs, pulling some commodities down along with it on the first day of trading in the 4th quarter.  An ISM print of 51.5 up from 49.6 in August should have had the market in a partying kind of mood along with the Chairman’s remarks but instead the risk-on trade was faded.  the S&P 500 (AMEX:SPY) closed at 1444.42 up 3.75 on the day while the NASDAQ (AMEX:QQQ) closed down 2.70 to 3113.53.

Still, it will not do to put too fine a point on it since if there was going to be heavy selling it would have happened on Friday to lock in quarterly profits.  Instead we got another mildly higher market on average volume indicating that indeed more money chasing the same number of shares eventually gooses them higher.  Gold was up strong posting a high above $1793 which was also faded along with equities and pulled back to the $1777 area on the December contract, above the previous line of defense by shorts at $1775.  Another session or two above that level would only increase the chances of a major push past $1800, which is formidable resistance and will likely take a few attempts to get through.  Consider today attempt #1.

In the end it was another great day for day-traders and HFT churn machines but the broader market fundamentals continue to exert themselves.  Everything up and the U.S. Dollar down.

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Tom Luongo

About Tom Luongo

Tom Luongo is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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