Stocks finished off a mostly quiet month of August, with one of the most volatile sessions of the month. The market gapped up to begin the day, upon arrival of the widely anticipated speech from Ben Bernanke at 10 AM at Jackson Hole, and upon release of the headlines from the speech sold off to fill the morning gap. The market then did a complete U-turn in the following 60 minutes to run to highs of the day, before selling off sharply between noon and 1:30 PM. However a new low was not created and the rest of the day was the normal chop we have become used to in August as many traders left early for the long weekend. The bottom line from the speech was the Fed stands ready, able, with many options yada yada. Nothing new here. One misconception of the 2010 Jackson Hole speech was Bernanke said nothing akin to "we're going to do a new round of easing" - he simply laid out a very similar framework as was outlined in the FOMC minutes released last week. So anyone expecting more was out of line - this is not a speech to dictate policy.
Over to the charts - the S&P 500 held yesterday's lows with a 0.5% gain on the day. It continues to hover in the middle of the ascending channel and more sideways action in a non volatile fashion would be a positive.
The NASDAQ had a bit more of a scare than the S&P 500 as Apple had another quiet session, and this index did break yesterday's lows briefly but came back to finish in good fashion with a 0.6% gain.
The stars of the days were precious metals as both gold and silver ran on debasement of the currency prospects. Please note the potentially very bullish technical condition in gold; a breakout from a descending channel. When these follow through they are sometimes the most powerful moves you will see within a chart. Both metals bounced smartly off their 200 day moving averages after clearing them last week on the announcement of the FOMC minutes.
Oil actually has a similar set up to gold in terms of a descending channel breakout but has some overhead resistance ahead in the name of the 200 day moving average.
PIMCO CEO Mohamed El-Erian explains what the Fed signaled today and how to invest in this environment:
“If you want to bet on the Fed, you’re looking at the short end of the Treasury curve. You’re looking at related high-quality corporates. You’re looking at mortgages and related sales of volatility. You also should recognize that the market will protect itself from the inflation threat, so hard assets — especially gold — will benefit. If you want to go all the way to risk assets — equities and high-yield — remember that you are dependent on China and Europe when you go all the way out there.”
Have a good weekend and we'll see you here next Tuesday as a very heavy week of economic data is about to hit.