Stocks Rally After Bernanke Says Easy Money Still Needed

SPX- Very Healthy Action

SPX- Very Healthy Action

Monday, March 26, 2012
Stock Market Commentary:

Stocks and other risk assets edged higher on Monday after Ben Bernanke spoke before Monday’s open. From our point of view, the major averages confirmed their latest rally attempt on Tuesday 1.3.12 which was Day 9 of their current rally attempt. Since then, stocks have been enjoying a very strong uptrend. The benchmark S&P 500 paused near its 2011 high (~1370) before moving higher and that level should now become support. The next level of support would be the 50 DMA line, then a deeper 5-9% pullback. That would bring the S&P 500 down to 1350-1280. It is important to note that the bulls remain in control of this market as long as the benchmark S&P 500 stays above its 50 DMA line.

Bernanke Lifts Futures, Economic Data Mixed:

Before Monday’s open, Fed Chairman Bernanke gave a speech and made it clear that an “accommodative” policy (i.e. easy money from the Fed) is still needed to stimulate the global economy. He also said that the latest round of economic data suggests the job market is getting better but the underlying conditions remain far from normal. The Chicago Fed National Activity Index, which measures inflation and economic conditions in the Mid-West, slid to negative -0.9 in February from January’s revised plus 0.33 due to lower levels of production. In other news, the housing market continues to struggle as pending home sales fell -0.5% last month which missed the Street’s estimate for a +0.1% gain. Pending home sales measure how many contracts were signed in a given month.

Market Outlook- Confirmed Rally

Risk assets have begun pulling back which at this point is considered normal. The key going forward is to gauge the health of the pullback and see if the bulls are able to defend logical areas of support (recent chart lows and important moving averages). So far this action is considered healthy for the risk on trade. However, if sellers show up and support is breached then the bears will have regained control of this market. As always, keep your losses small and never argue with the tape. If you are looking for specific help navigating this market, feel free to contact us for more information. That’s what we are here for!
Coming Up This Week:
MONDAY: Pending home sales index
TUESDAY: S&P Case-Shiller home price index, consumer confidence, 2-yr note auction, Fed’s Rosengren speaks; Earnings from Lennar, Walgreen
WEDNESDAY: Weekly mortgage apps, durable goods orders, oil inventories, 5-yr note auction, Fed’s Bullard speaks, FDA discusses obesity drugs
THURSDAY: GDP, jobless claims, corporate profits, Fed’s Plosser speaks, 7-yr note auction, farm prices, Fed’s Lacker speaks; Earnings from Best Buy, Research In Motion
FRIDAY: Personal income & outlays, Chicago PMI, consumer sentiment, Stringer’s last day as Sony CEO