Thursday, April 28, 2011

Bernanke Gives Markets The Green Light

The markets are hovering near the flat line in early trading, but closed on a very strong note yesterday after the FOMC meeting and Bernanke's press conference. Bernanke basically gave the green light to the markets by indicating that QE2 will continue into the end of June, and at that time the Fed will continue to reinvest maturing proceeds, which basically means it will maintain the size of its large balance sheet.

This was an indication to the market that monetary policy will remain accomodative, and that was a signal to buy equities, commodities, etc. There was nothing in his comments to indicate any tightening coming, and as such there has been no rally in the dollar.

Commodities continue to run, with oil prices back to $113, and gold prices up to new highs at $1535. But silver has had the most amazing run of all lately, and is nearing all-time record highs at $49 today. The chart of silver looks like it has gone parabolic, and does not appear sustainable.

Earnings reports continue. On the plus side, stocks that are higher after earnings include PEP, AET, and FTNT. A few disappointments on the earnings front are XOM, AKAM, and PG.

In economic news, advance GDP for Q1 was released today and came in slightly above estimates at 1.8%. That is a big slowdown from last quarter's 3.1% spike, but it was widely expected and is also expected to pick up in the second half of the year.

The bond market is hinting at more slowing, with the 10-year yield trading down to 3.31% today; the VIX is also lower, back below the 15 level to 14.78.

Trading comment: Yesterday's action was very bullish, as Bernanke gave the green light to investors. The market closed at new highs for the year also. So for the near-term, I want to be a buyer on dips and add to all of our favorite names when we get opportunities. I do think we will have the normal summer correction, but at this point I have no idea if it will come in May, June, or later. So let's not put the cart before the horse.


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