Mid-Week Update
Well the big news this week is today's announcement from Mr. Bernanke on interest rates. Most expect that this will be when we "pause" the rate increases (in fact some have speculated that a rate reduction may be in the works, but frankly I think this is very unlikely).
The markets will react no matter what the news, but should another increase occur, expect a rapid drop in the markets. However, I (like most) now expect rate increases to stop. Signs are showing the economy has slowed (some might say too much) and unless there's a major surprise, Mr. Bernanke is likely to pause with the increases.
The key will be whether he hints at future direction. Will this be a "pause" with rates to increase at the next meeting, or will he hint that we're done with increases for the forseeable future (or possibly have a rate drop)?
All speculation at this point, but what is certain is that the markets will react.
As for the markets, the DOW has done a nice job holding above 11,200--our previous level of resistance (and now support). Consequently, we're bullish on the DOW, so long as it remains above 11,200.
We're a bit less bullish on the NASDAQ--it's had trouble with 2,100--a major line of resistance. We bounced off this recently. However, good news today from the Fed may provide the momentum to break this level. Stay tuned--but for now, caution is the word on the NASDAQ, as we're neutral to bearish here.
Similarly, the S&P is right at resistance (1,275). We need to move above (and hold) this level to confirm our bullish tendencies. Watch for a bounce off this level though, and be prepared to close open longs should the markets quickly reverse themselves should they bounce off resistance. Right now, we're neutral on the S&P.
Clearly, we're at a "tipping point" here--and the Fed is the key. If we get good news, look for good volume breaking resistance on all the indices. If the news is bad, expect the indices to bounce off resistance levels and head back down.
The other big news this week is (of course) oil, and the closing of the BP pipeline in Alaska. It remains unclear whether this will have a major affect on the markets in the future, but as oil has been a driving force lately, we expect some repurcussions to show in the markets. Bad news from the Middle East may compound any effects from the BP pipeline, so there are many potential interactions here. The key is to stay "nimble" with any open trades.
A final note this week will be to look at CME--this stock has shown a nice breakout on clearly higher volume--a result of the announcement that CME will be added to the S&P 500 index (which means that institutional investment firms will need to buy this stock for their index funds). This may move up nicely over the coming weeks, especially should Mr. Bernanke's news be favorable. One to watch, certainly.
Good trading to all this week!
The markets will react no matter what the news, but should another increase occur, expect a rapid drop in the markets. However, I (like most) now expect rate increases to stop. Signs are showing the economy has slowed (some might say too much) and unless there's a major surprise, Mr. Bernanke is likely to pause with the increases.
The key will be whether he hints at future direction. Will this be a "pause" with rates to increase at the next meeting, or will he hint that we're done with increases for the forseeable future (or possibly have a rate drop)?
All speculation at this point, but what is certain is that the markets will react.
As for the markets, the DOW has done a nice job holding above 11,200--our previous level of resistance (and now support). Consequently, we're bullish on the DOW, so long as it remains above 11,200.
We're a bit less bullish on the NASDAQ--it's had trouble with 2,100--a major line of resistance. We bounced off this recently. However, good news today from the Fed may provide the momentum to break this level. Stay tuned--but for now, caution is the word on the NASDAQ, as we're neutral to bearish here.
Similarly, the S&P is right at resistance (1,275). We need to move above (and hold) this level to confirm our bullish tendencies. Watch for a bounce off this level though, and be prepared to close open longs should the markets quickly reverse themselves should they bounce off resistance. Right now, we're neutral on the S&P.
Clearly, we're at a "tipping point" here--and the Fed is the key. If we get good news, look for good volume breaking resistance on all the indices. If the news is bad, expect the indices to bounce off resistance levels and head back down.
The other big news this week is (of course) oil, and the closing of the BP pipeline in Alaska. It remains unclear whether this will have a major affect on the markets in the future, but as oil has been a driving force lately, we expect some repurcussions to show in the markets. Bad news from the Middle East may compound any effects from the BP pipeline, so there are many potential interactions here. The key is to stay "nimble" with any open trades.
A final note this week will be to look at CME--this stock has shown a nice breakout on clearly higher volume--a result of the announcement that CME will be added to the S&P 500 index (which means that institutional investment firms will need to buy this stock for their index funds). This may move up nicely over the coming weeks, especially should Mr. Bernanke's news be favorable. One to watch, certainly.
Good trading to all this week!
posted by Dan at 8:35 AM
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