Bernanke Rocks the Market
e-mini S&P – Comments by Ben Bernanke yesterday sucked the life out of equities in the early going and the market was unable to recover, with the S&P posting a second consecutive day of double-digit losses. The Fed Chairman warned investors that while the Central Bank’s rate cuts will help the economy, the Fed cannot “insulate investors from risk,” and noted that the slumping housing sector is likely to continue its drag on the economy. DataQuick Information Systems also released data showing that southern California home sales declined by nearly 30 percent in September, with the lowest number of units sold since the company began tracking housing data in 1988. The market will have more housing data to digest with today’s release of Housing Starts and Housing Permits at 7:30 AM CST. The figures are expected to come in at 1.285 and 1.3 million, respectively, both down from August. Also hitting the newswires, Citigroup, JPM and Bank of America announced that they have set up a rescue fund of sorts to bail out global credit markets at the behest of the Treasury Department. The fact that such a fund was set up probably adds more fear than comfort to the marketplace, at least among small investors. The spike in Crude Oil prices has also weighed on the market in the first two days of trading this week. Technically, the December e-mini continues to stay in an uptrend, but the close below the 18-day MA may signal that a near-term high is in place. The RSI and slow stochastics are both in neutral territory, which leaves room for more downside before the market ventures into oversold territory. Support comes in at 1530.00 and 1500.00, while resistance can be found at 1566.00 and all-time highs of 1586.75.
Wheat – Wheat finished lower overall, but did bounce back late in the day to avoid a technical breakdown. Lack of positive fundamental news seems to have taken the wind out of the Wheat market's sails, leading to this most recent wave of selling. Unwinding of long Wheat / short Corn spreads after Friday's supply and demand report and continued profit-taking helped push things to the downside, even as traders have largely shrugged off the news that heavy rains have set back early winter Wheat planting. December Wheat held above the critical 830 mark, which if violated would have confirmed a head and shoulder reversal pattern. Wheat found solid support around 815, which also happens to be in the neighborhood of the 50-day SMA, and the strong close formed a bullish hammer, which may give Wheat a slight bullish short-term technical bias. The momentum indicator showed almost no change from the previous trading session and registered a bearish -40.50. Both the RSI and slow stochastics are showing oversold levels, which could give the market a lift. Support comes in at 815 and the 38.2 Fibonacci retracement support of 765.25, while resistance can be found at recent highs of 890 and 911.25.
10-year Notes – The treasury markets have retreated since the surprise rate cut in August drove 10-year Note yields down to 21-month lows of 4.3 percent. Traders have been reluctant to jump into the treasuries despite credit fears and weakening economic indicators. This hesitance has been based on a number of wildcard factors, including inflation fears stoked by rising energy prices and the growing belief that the Fed may shift gears and raise rates. Last Friday's PPI data showed contained inflation, but traders are looking for follow-through in this morning's CPI release. The housing report may not make much of an impact on the market unless there is a huge surprise one way or the other. December Notes have weakened technically, with prices trading below the 50-day SMA for the over a week. A close below 108-00 may spark selling and trigger stops. Support can be found at 108-00 and 106-13, while resistance comes in at 109-06.5 and 109-30.
