Market Montage

After the volatile session yesterday, the S&P 500 has broken back above the channel we have been discussing for a few weeks and now the Russell 2000 and NASDAQ appear to be joining (was not the case yesterday).  If not for the focus on the FOMC presser tomorrow you'd have a nice clean breakout starting here.  Tomorrow is of course a major wildcard.

On a related note – the 50 day moving average has been quite the support in 2013. In fact no year other than 1995 in the past 30 comes close to what we …

This is very much like the fiscal cliff environment where one politico comes out and says one thing, and market rallies, and then another politico says something opposite an hour or day later and the market falls.  Except this time its news agencies.  What Hilsenrath giveth, the FT is taking away this afternoon.  And with that the breakout that looked just fine 30 minutes ago is severely threatened.

Many of the up moves since 2009 seem to come off an overnight gap up and today is no different.  We'll see if bulls can hold this but right now they have punctured the top end of this channel.  A close over last Monday's highs would create a new higher high that many are looking for.

As stated late last week this FOMC meeting will actually be one to watch as the now month long correction has been all about a potential dissipation of quantitative easing.  With employment nowhere near target and an argument that not only is inflation tame but disinflation is a potential issue (at least by government statistics) it really doesn't seem like 'tapering' is coming soon.  But that is all the market has focused on (along with the yen/Nikkei) for 4 weeks now.

Volatility has picked up substantially the past few weeks and we are now …

Well speaking to the comments just posted a few hours ago we just got a story from Fed mouthpiece Jon Hilsenrath at the WSJ, indicating we can expect a very dovish press conference from Bernanke next week.  The market rocketed up on the news and all is well in the world again as QE infinity still is boundless apparently.   Even after all this volatility we just went from red to green for the month of June on the S&P 500.  Thankfully there is no longer a need to know anything about earnings, revenue, margins et al – you just have to know what Ben is going to do or say.

At the same time, however, the Fed is talking about pulling back on its $85 billion-per-month bond-buying program. The chatter about pulling back the bond program has pushed up a wide range of interest rates and appears to have investors second-guessing the Fed’s broader commitment to keeping rates low.

This is exactly what the Fed doesn’t want. Officials see bond buying as added fuel they are providing to a limp economy. Once the economy is strong enough to live without the added fuel, they still expect to keep rates low to ensure the economy keeps moving forward.

It’s a point Chairman Ben Bernanke has sought to emphasize before. The Fed, he said in his March press conference and again at testimony to Congress last month, expects a “considerable” amount of time to pass between ending the bond-buying program and raising short-term rates.

He seems likely to press that point at his press conference next week, given that the markets are telling him they don’t believe it.