The Fed Wants Inflation

Yesterday, the Fed said it was prepared to move on new
stimulus if the economy weakens further. What’s more, the Fed’s statement
that inflation is below levels it wants to see suggests that further easing
is coming. That’s a clear indication that the Fed is still worried about
deflation.

I suppose it’s a good sign that the Fed held off on new
easing action. But the Fed also failed to sound a confident tone about the
economic recovery, which I think is mistake.

Of course, we know the economy isn’t great. But most
economic data has improved over the last month or so. And it should be
understood that there is no magic bullet that puts millions of Americans back
to work. It’s going to take time, re-training and probably some government
incentives.

What the Fed Should Say

Today is Fed day. That’s when we will get the latest policy
announcement and economic outlook from the Federal Open Market Committee
(FOMC). There are 8 of these meetings a year, and the Fed uses these meetings
to decide whether to change interest rates, among other things.

FOMC have been market-moving events for a while now, as the
U.S. economy has struggled.

When the Fed has good news for the markets, its job is easy.
But days like today require some careful comments.

You Shall Not Pass!

The S&P 500 is at a very interesting spot. On Monday, September 13, it
gapped up and ran above resistance at 1,120. It’s dipped below that level every
day since. But the bulls have rallied and closed the S&P 500 above 1,120
every day.

The S&P 500 is consolidating recent gains above an important
support/resistance point.

This is exactly the kind of action I like to see. And the trading floor guys
and the talking heads on CNBC are all buzzing that this rally might have legs,
these gains might stick.

What Will Obama Say?

Yesterday, buyers mustered the strength to build on
Wednesday’s strong rally. In fact, the bulls pushed the S&P 500 above a
key resistance point at 1,085.

I’ve talked at length about how pessimism was at an extreme
and a bounce for stocks looked likely. Recent economic data has been good
enough to support the notion of an economic recovery, and while not setting
records, it is at least strong enough to avoid a double-dip of
recession.

Most of the recent data was in line with expectations:
factory orders were up 0.1%, productivity was down 1.8% and labor costs were
up 1.1%. However, Wednesday’s strong new home sales for July (up 5.2% when a
loss was expected) was probably the single most important data point.

The Truth Behind Tech Revenues

Up, down, up down. To say that the stock market has been
volatile over the last week is like saying King Kong was big monkey. It’s
true, but it doesn’t really give the complete picture.

Investors and traders really don’t seem to know what’s
coming next. I’ve tuned into
CNBC a few times during the trading day recently, and you can see the
frustration on the commentators’ faces. It’s as if they know that, no matter
what they say, they will be wrong.

This market is experiencing indecision in its purest
form.

Major Changes Expected for Index Funds as Russell Rebalances







Russell Investments will reconstitute the stocks in the Russell Indexes
after the closing bell today, Friday June 25. For many funds that track
Russell’s indexes this means there will be frantic buying and selling over
the coming days.

Given the turmoil in the market over the past 12 months, analysts are
looking for many familiar stocks to be jettisoned while previously unknown
stocks are cast in the limelight.

Will Cash on Hand Lead to Hiring?






Sometimes, trying to decipher the stock market’s signals
is easy. Like during the rally out of the March 2009 lows. It was clear
that stocks were ready for a strong move higher.

Sometimes, it’s more difficult to get a handle on the
subtle shifts in sentiment that drive stock prices. The correction in
January of this year is one such example.

Other times, it’s darn near impossible to read the tea
leaves. I’d say now is one of those times. The stock market is giving off
mixed signals. And that’s because, at the most fundamental level, the
economic picture is mixed. For every bullish point investors can make,
there’s an equally valid bearish counterpoint.


Bernanke to Congress: Reduce the Deficit!

As stocks traded mostly sideways today, Federal Reserve Chairman
Ben Bernanke paid a visit to Congress to address the House Budget
Committee. In a surprising turn from what’s been the hallmark of
his reign as the head of the Fed, Bernanke seemed legitimately
concerned about sovereign debt issues here in the United
States.

He said, “To avoid sharp, disruptive shifts in spending programs
and tax policies in the future, and to retain the confidence of the
public and the markets, we should be planning now how we will meet
these looming budgetary challenges.”

Strong words for a Fed Chief who has been responsible for the
largest money supply increase in the history of the U.S. 

What? BP’s not American?

That was an excellent rally yesterday! The S&P 500 broke through important resistance at 1085. For more insight, I will turn to my trusted sidekick, technical analyst for TradeMaster Daily Stock Alerts Jason Cimpl…   

 

After the weakness on Tuesday, I was beginning to doubt the bulls ability to take the market higher. The group came through yesterday and took back 1085, which needs to become support. Volume was low again, but internals were commendable as buyers out numbered the sellers by 5 to 1. Today the big resistance to watch will be 1103 and 1115. SPX 1103 stopped the market dead in its tracks last week. Stronger lateral resistance exists at 1115 which dates back to December 2009 and is also the 20 DMA and gap resistance.