"The Fed doesn't really have any better information than other people in the market about what the correct value of asset prices is."
-- Ben Bernanke
It is all about big Ben Bernanke and the potential for further quantitative easing today. We have more talk about the economy being on the verge of falling into recession again, and the big question is whether the Fed is going to act now to try to prompt us up again or will it just keep its options open and wait for further data.
The skeptics correctly state that quantitative easing obviously hasn't done much to help the economy if we are on the verge of another recession. It did, however, boost the stock market, and that is all that investors are really concerned about. At least, we might be able to make some money in stocks while the real-world economy continues to stumble like a drunken bum.
Technically, the market is sitting in the middle of a trading range that it has formed over the past couple weeks, and all it needs is a shove in one direction or the other. Upside resistance is at 1375 on the S&P 500, and downside support is around the 50-day simple moving average at 1325-1330. A breach in either direction will bring in the momentum chasers.
The market seems to be anticipating something positive from Ben Bernanke at the Senate hearing today, and that has me concerned. While the economy has been struggling and we obviously still have issues in Europe, the message from the Fed lately is that it isn't going to act unless there are clear negative developments. Ben Bernanke has repeatedly said that he will act as needed but that the Fed continues to monitor data and isn't rushing to do anything.
I'm looking for Dr. Bernanke to repeat the same mantra once again -- the Fed is watching closely and will act as needed but isn't doing anything at this time. The market is not likely to find that message very appealing, and we are likely to see selling pressure as a result.
Nothing matters more than the Fed right now, but earnings will start to roll out in earnest, and that is going to influence the mood as well. One of the most important reports is from Intel (INTC), which is due tonight. The company's earnings have a history of producing turning points, but it is worrisome how weak the semiconductor sector is acing lately.
Goldman Sachs' (GS) and Coca-Cola's (KO) reports look OK, but we had warnings last night from J.B. Hunt Transport Services (JBHT) and Mattress Firm Holding (MFRM). Johnson & Johnson (JNJ) is guiding down, which is not a good sign. While expectations for earnings are low, they may not be low enough.
Buckle up, and we shall see what Ben Bernanke has in store for us. Nothing else matters right now.