Hurry Up And Wait

The markets are fairly flat this morning as everyone awaits the testimony from Fed Chairman Bernanke today.  I don't remember a time when there was so much anticipation of an FOMC meeting.  And it's not about a rate hike or rate cut this time, but rather if he mentions any hint of whether the Fed may begin to taper its QE purchases as early as September.

The market could see some volatility on Bernanke's comments, but I would expect it to settle down again soon after.  Even if the Fed does taper they are still far away from tightening monetary policy.  Taking their asset purchases from $85 billion to something in the $60s is still quantitative easing, albeit it slightly lower.

In corporate news, both Adobe and FedEx topped earnings estimates and both stocks are higher today.

Among the sector ETFs so far, energy and materials stocks are leading while defensive utilities and healthcare are lagging.  But by the close today we could see a reversal of this.

Asian markets were mixed overnight with China and Hong Kong lower and Japan higher.  Europe's markets are also mixed so far today.

The 10-year yield is still hovering around that 2.20% level.  It will likely see some fireworks around 2pm EST when the FOMC statement comes out.  It recent closing high was 2.23% for reference.

The volatility index hit 17 this morning before fading back near 16.50 for a second day.

Trading comment: Yesterday's action in the stock market was more positive than I expected and it now looks like the short-term double bottom pattern in the S&P 500 is complete.  The SPX is trading near the 1650 level and its high this year was around 1687.  So our thesis that the market could challenge its highs into quarter end certainly looks more plausible than it did a couple of weeks ago when the SPX was testing the 1600 level.  But the task at hand is to see what the Bernank has to say and try not to be shaken out of positions on any short-term volatility.  I still see the buy-the-dip mentality persisting into quarter-end.

KAM Advisors has long positions in FDX