- Bernanke QE3 comments help spur an early bounce off support, but stocks have a hard time keeping it up.
- China GDP lower but tops expectations, aiding the market bounce as some say no hard landing for China. Really?
- ‘Transitory’ slow patch? Some of Bernanke’s henchmen have their own term for it and we have ours.
- Moody’s downgrade watch is its next step to blackmail Congress.
- Intraday reversal off the highs is disappointing for the upside, but leaders are still holding their near support.

MARKET SUMMARY

Buyers show up but they don’t hang around.

Futures were up after a third day of selling found SP500 at its 50 day EMA. China helped get the more favorable mood established when it reported 9.5% GDP growth, topping the 9.3% expected. That was lower than the Q1 9.7% level, but investors were relieved it did not fall as much as thought.

As noted, futures jumped on this news and it underscores a very important fundamental change that many people deny or pretend doesn’t exist: the US and its ‘export economy’ our President loves to tout (as his policies and the Fed’s actions devalue our dollar) is dependent upon economies that are growing at a much faster rate and will continue to do so given our conscious decision to abandon what has made our economy the strongest in world history. Export economies don’t create new technologies and thus the new jobs and higher standards of living. They react to what the growth economies want and provide it. Thus our fortunes are tied to the fortunes of the growth countries and that is why we see our markets up and down based upon what the latest temperature reading is regarding the Chinese economy. In the words I used this morning, we have the ring in our nose are led around by these other countries. Great position to be in.

Stocks started higher and then Bernanke presented testimony to Congress that actually admitted that the ‘slow patch’ may not be so slow. Indeed one of his cohorts, Rosengren, earlier said that she wasn’t sure that ‘slow patch’ was the right phrase for the economic slowdown given the “persistently slow recovery”. Rosengren did not proffer any alternative so we will. This morning I proposed ‘downright crappy’ and will entertain any others that you have.

Anyway, Bernanke actual said the Fed could, if the economy needed it, engage in several forms of stimulus including a new QE round. That brought in even more bids and by midmorning the indices were sporting gains in the range of 1%. That took SP500 to its early March peak. That was the top of the move.

The remainder of the session the indices, and the stocks that jumped early, backslid, making a series of lower highs and lower lows. In the last hour the selling intensified and it was a question as to whether the indices would totally regurgitate their gains. Fortunately a bounce in the last quarter hour kept them from reaching for the airsick bag.

They managed to close with gains, but they gave up huge chunks of ground. NASDAQ returned 28 points; SP500 23; DJ30 120 points. Not a great finish. SP500 is still holding over its 50 day EMA and many leaders are still holding near support in their pullbacks, but the intraday action giving back such big gains is never a positive. Doesn’t mean it turns over and sells further, but it keeps the upside still in the position it has to prove itself. It is important to note that SOX was lower on the session, continuing its selling. The market has followed SOX lower before so this is another concern added to the intraday reversal.

NASDAQ 0.54%; SP500 0.31%; DJ30 0.36%; SP600 0.79%; SOX -0.28%

Big day in terms of economic data with weekly jobless claims, retail sales, and PPI. Jobs, consumers, prices. Friday consumer prices. On top of all of that earnings and more earnings.

Then after hours Moody’s chimed in again on the debt ceiling debate in the government, saying it would lower the US credit rating to AA from AAA if no deal was struck. Then you hear the President walked out of meetings with Congress this afternoon. That is the Administration’s tactic apparently; did it to the Israeli PM as well. Nice style of leadership from the purportedly most powerful man in the world; take your toys and leave.

This as we learn that the US has just accumulated another $1T in deficits in just 9 months. I don’t believe many have really thought about how insanely out of control our government is. It has spent us into oblivion and a mindboggling large percentage (4T in 2 years) of that debt has been accumulated by the very President who heroically walks out of meetings designed to reach a solution. You can expect that from some House members, but the President? Not feeling good about this.

The stock market is again at an important test for the upside with SP500 at the 50 day EMA. The failed Wednesday break higher was disappointing but it did not turn the pattern(s) over. It did not turn the leaders over either.

So we see if they can do the improbable and reload for another attempt, this time one that sticks. There are plenty of leaders in position that we can take advantage of.

Given the reversal we also have to factor in some downside plays in the event the market cannot hold this near support and continues lower. That is life in the range. Had a great run and made some solid money and now that move is being tested. It looks as if it can hold and bounce but it has to prove it. If it does we are there. If it doesn’t we are there as well, just in a different direction.