And The Winner, After Bernanke's Humphrey Hawkins Dog & Pony Show, By Unanimous Decision Is.... Gold
Stocks dumping, dollar at all time lows against a plethora of FX pairs, while gold (and silver) is sticky as superglue and remains just a few dollars away from its all time nominal highs, and just short of $1,600, which we expect will be taken out as soon as the world realizes that the Greek 2 Year spread to Bunds is now over 30% and that Europe is not fixed. Perhaps Bernanke would like to take another stab at that whole "is gold money" question...
Stocks versus Gold and Silver: by unanimous decision....
And Greek 2 Year spread to Bunds:
In the meantime, the market remains totally schizophrenic, as QE3 goes from ON to OFF, based on how the Chairman wants to move the market. Remember: QE3 will not begin until the S&P is below 1,000. Although schizophrenia is nothing new, and merely a continuation of yesterday's deranged activity, as explained by Art Cashin:
Thank Ye, Bernanke - or - Maybe Not - The financial media claims that yesterday’s action was all about Chairman Bernanke’s Congressional Testimony. While it was a significant influence, it wasn’t the whole story. In fact, yesterday’s market was an interesting tutorial on market reaction.
The market’s firmer tone began in the wee small hours of the morning with the solid economic data out of China. It was evident that the recent series of rate hikes and reserve tightening had not crippled the Chinese economy. That was one less thing to worry about, keeping the concern areas to Europe and the U.S.
The firming market was further aided by some cooing noises on Italy from the rating agencies - not an actual upgrade but reassurances nonetheless. And dawn had not even hit New York yet.
Then, around 9:00, Boston Fed President Rosengren strode to the podium. He called Friday’s payroll data “dismal” and said that Fed policy must remain accommodative. That seemed to reinforce the hint of a QE3 that the markets thought they sensed in the FOMC minutes Tuesday afternoon.
So, as the opening bell neared, futures were predicting an up-move of about 50 points in the Dow. That’s what happened and almost immediately stocks began to consolidate in front of the Bernanke testimony.
At 10:00, the text of the testimony was released and markets and pundits seized on his presentation of possible further stimulative moves. They proclaimed it QE3, confirming that image from both the FOMC minutes and from Rosengren’s comments less than an hour earlier.
The result was instantaneous. Within minutes, the Dow was up over 100 points and rocketing higher. By 10:30, the Dow was up 165 points. Stocks then paused as the testimony continued.
As the testimony moved on, analysts began to re-examine the text. The further measures did not appear a foregone conclusion. Some skeptical comments began to show up on the TV screens.
Then shortly after 1:00, Dallas Fed President, Fisher began to speak. He seemed to say the Fed had done enough and should engage in watchful waiting. That made the likelihood of a quick QE3 seem a lot less certain. Bids began to fade. By 2:30, stocks had given up over half their gains.
Around 3:00, some more aggressive selling began. After the close, some attributed that selling to some remarks by Speaker Boehner on the debt ceiling stalemate. That may have been the case but we didn’t hear it on the floor at the time.
At any rate, the 3:00 selling continued for over a half an hour. At that point, traders began to worry that we might actually fall into negative territory. Luckily, they got bailed out (a bit) by market on close buyers. Lots of action in response to lots of influences. A lot better than recent robo-trading.
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