ZLBT Chats

Thursday, February 25, 2010

Sweet Talking Bernanke Soothes Wall Street

Negative Home Sales Data Loses Out To Bernanke; Dow Up 0.89%
All eyes were on Federal Reserve Chairman Bernanke today, as the central banker began a two-day venture on Capitol Hill. Issuing his semi-annual assessment of the economy, the Fed chief didn't disappoint, assuring Congress that last week's move to boost the rate on emergency loans to banks doesn't necessarily indicate more rate hikes in the near future.

As a result, Wall Street investors let out a collective sigh of relief, sending stocks soaring in late-morning activity. Though the government's report that new-home sales unexpectedly fell to a record low in January helped to limit the bulls, the major market indexes settled in the black nonetheless, halting a two-day downturn.

The Dow Jones Industrial Average (DJIA – 10,374.16) finished with a gain of 91.75 points, or 0.9%, as all but two of its 30 components ended higher. Pacing the advancing issues were financial concerns Bank of America (BAC) and JPMorgan Chase (JPM), while Alcoa (AA) and Kraft Foods (KFT) bucked the trend. After two straight days of losses, today's resurgence has the Dow positioned back atop support at its 10-week moving average, though the blue-chip barometer hasn't yet negated all of its weekly deficit.

In form, the S&P 500 Index (SPX – 1,105.24) added 10.6 points, or 1%, climbing back atop both the 1,100 level and its own 10-week trendline. Meanwhile, the Nasdaq Composite (COMP – 2,235.90) advanced 22.5 points, or 1%, reclaiming a foothold atop its 10-week moving average. However, like the Dow, the SPX and COMP remain in the red for the week.
Similar to yesterday, the bulk of the day's movement occurred in morning and the afternoon was just a sideways drift. Of course, the difference is that yesterday was dominated by sellers while buyers ruled today.

On the topic of whipsaw moves. The Dow dropped 101 points yesterday and recouped all but 10 of those points today. Unfortunately, that means the indexes are still are stuck in the middle of nowhere when it comes to near-term support and resistance.

As stated in yesterday posting, I think you get the best reads of the underlying supply and demand when the indexes are near significant levels. That means "patience" is the name of the game here.

And that is where I will pick up tomorrow.
Have an enjoyable & rewarding trading day.

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