Uncertain Bernanke Bust The Dow
The Dow suffered a triple-digit selloff on Wednesday as new comments from Fed chief Ben Bernanke reminding Wall Street of the “unusually uncertain” nature of the economic recovery spooked the markets and drowned out a cluster of bullish earnings reports.Stocks stayed close to the breakeven line through the first half of the session, before embarking on a dramatic decline in afternoon trading. Federal Reserve Chairman Ben Bernanke can take most of the credit for the market's nosedive; in Senate testimony today, he noted that the economic outlook is "unusually uncertain," and central bankers are "prepared to take further policy actions as needed" to support a recovery. "Financial conditions ... have become less supportive of economic growth in recent months," admitted Bernanke. Thanks to the Fed head's sober forecast, traders shrugged off upbeat earnings from the likes of Apple and Morgan Stanley (MS), and fled the equities market in favor of the relative safety of bonds and the U.S. dollar.
The Dow Jones Industrial Average (DJIA – 10,120.53) pared the worst of its intraday decline by the close, but still swallowed a sizable deficit of 109 points, or 1.1%. Only four Dow members closed higher, with Coca-Cola leading the way on the heels of its quarterly report. Meanwhile, financial firms Bank of America and JPMorgan Chase paced the 26 decliners. Despite today's drop, the Dow is still perched just a hair's breadth above its 10-week moving average, which has been toppled only once on a weekly closing basis since April.The S&P 500 Index (SPX – 1,069.59) followed suit by shedding nearly 14 points, or 1.3%. The SPX's intraday slump was contained by its 20-day moving average, which has provided tenuous support since July 9.
Finally, the Nasdaq Composite (COMP – 2,187.33) gave up 35 points, or 1.6%, to settle back below the 2,200 level. The COMP's slide was contained by the 2,185 region, home to its 20-day trendline.
FKLI Recommendation
The appearance of the Hanging Man on 21/07 has U-turned the FKLI sentiments.
SELL INTO STRENGTH / RALLY
FCPO Recommendation
BUY ON WEAKNESS / PULLBACKS
Preferably during a FLURRY SELL-OFF
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