Bernanke Disappoints, QE On Sidelines Again

Opening Market Commentary For 08-31-2012

Premarket SP500 was interesting in that it went from 1398 at the close yesterday to 1412 this morning and backed off to the opening session of 1407. Most averages are in the green and mixed with the DOW up nearly 100 points and the Russell 2000 lagging some 46%. The University of Michigan Consumer Confidence Index for August ROSE to 74.3 while expecting 73.6. The prior was 72.3. U.S. Consumer Sentiment Index Unexpectedly Upwardly Revised

As 10 am rolled around awaiting Dr. Ben’s speech the markets and volume tapered off to little activity. It didn’t take long for the equities to reverse the earlier market bullish action into a bearish one moving markets decidedly down and quickly.

The volume was not very heavy either. Something between low and moderate confirming my previous thoughts of a slowly descending market not exceeding 2%. Interestingly, the markets rose right back up to previous levels but then started melting down. Suspect HFT manipulation as volumes remain very low amidst a confused market place. Avery dangerous precedent in my lowly opinion.

In other news the US Factory Orders for July ROSE 2.8% while expecting 2.0% with the prior report was -0.5%

Ben Bernanke talking points. (Dailyfx)

• Fed will boost accommodation as needed for growth.

• Housing, Europe, fiscal cliff pose ‘headwinds’.

• Stagnation in labor market is ‘grave concern’.

• He wouldn’t rule out further asset purchases.

• High unemployment may ‘wreak structural damage’.

• U.S. faces ‘daunting economic challenges’.

• QE ‘significantly lowered long-term treasury yields’. QE helped fuel sustained recovery in U.S. stocks.

• Impact of QE is ‘economically meaningful’.

• Gauging QE impact on economy is inherently difficult. QE ‘provided significant help for the economy’.

• QE mitigated risk of deflation.

• Using non-traditional policy tools is challenging.

• Economy situation is ‘far from satisfactory’.

• Labor market improvement has been painfully slow.

@DavidJSong: “Seems like the FOMC rate decision on September 13 may continue to sap bets for QE3. Looks like the Fed will continue to sit on the sidelines. As they should. . . Data has been picking up albeit still modest at best. . But Doesn’t NOT Warrant QE. . . by any means. . . “

@dailyfx:

Hardly sign of healthy market as $SPX posts huge wick to downside and still stalls at resistance. I remain bearish. http://t.co/8S8Nla1Y

@SA:

The Fed’s balance sheet has actually been contracting at an annualized pace of 6% this year, notes Andy Lees. Lees, however, may draw the wrong conclusion, saying the decline “does not seem indicative of the Fed about to launch (QE).” Instead, one might think a shrinking balance sheet is raising alarms at the Fed, which will now want to launch QE to reverse it.

The RRR** actually was excellent IF you could guess that the markets would reverse after Ben’s remarks. Damn, back to guessing again. Swing trading is at your own risk and being the market is at a crossroads of sorts, I would prefer to sit on my hands rather than risk guessing incorrectly.

The DOW at 10:30 is at 13101 up 101 or 0.79%.

The 500 is at 1408 up 8.73 or 0.62%.

The $RUT is at 809.97 up 1.33 or 0.17%.

SPY is at 141.30 up 0.82 or 0.58%.

The trend is neutral and the current bias is up. (For the time being – extremely choppy and massive swings.)

WTI oil is at 95.54 trading between 94.53 and 96.67 and the bias is negative.

Brent crude is at 113.28 trading between 112.40 and 114.12 and the bias is negative.

Gold turns lower, oil trims advance after Bernanke

Gold is at 1669.92 trading between 1652.20 and 1663.40 and then fell to 1646.80 during Dr. Ben’s speech and shortly after rose dramatically 1670.05.

Dr. Copper is at 3.43 down from 3.46 earlier.

Earlier the USD tumbled from 81.73 to 80.97 and is currently at 81.17.

@zerohedge:

Bernanke Fails To Deliver As Chairman Checks To Congress

Bernanke takes the wind out of the market’s euphoric sails: “Substantial further expansions of the balance sheet could reduce public confidence in the Fed’s ability to exit smoothly from its accommodative policies at the appropriate time. Even if unjustified, such a reduction in confidence might increase the risk of a costly unanchoring of inflation expectations, leading in turn to financial and economic instability.”

** RRR = Risk Reward Ratio

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Written by Gary