The Market Authority reported that the Federal Reserve Chairman Ben Bernanke testified in front of the Joint Economic Committee. In his opening remarks, the head of the central bank has signaled that he shall continue to keep the current quantitative easing program in place. Traders and investors easily saw the decline in the U.S. Dollar Index after his comments were released. Chairman Bernanke warned that reducing the Federal Reserve's efforts to keep borrowing rates low would carry a substantial risk of slowing or ending the economic recovery. This means that he will keep interest rates at zero percent and continue to buy $85 billion a month worth of mortgage backed securities and U.S. Treasuries for the foreseeable future.
Elliott Wave International reported that yesterday U.S. stocks rose at the open but then reversed sharply lower. For the DJIA, it was the biggest 1-day swing in 6 months.
The move coincided with congressional testimony by the Fed Chairman Ben Bernanke. I say "coincided," because the market's mood, visible via Elliott wave patterns, was suggesting a nearby top even before Mr. Bernanke's comments.
See for yourself. As early as May 20, the S&P 500 was showing this wave pattern (partial wave labels shown):
As you can see from the above chart, the market was finishing a wave 5, the ending wave of an Elliott wave sequence. That was the reason why before the open on May 22, our U.S. Intraday Stocks Specialty Service expected a move higher yet warned of a nearby top:
May 22, 2013 09:20 AM
Market Overview: Good morning. Higher futures numbers this morning suggest this advance may not be quite done. At least in the NASDAQ that is what the internals suggested for the fifth-wave of an ending diagonal, so a flexible view of the count in the other markets should be maintained. The internals for this move up from the April pivot low suggest all of five-waves up may be in place.
Another morning intraday comment gave an upper price target, 1683-1684:
5/22/2013 10:06:20 AM ET
The new high this morning suggest wave v is extending as a larger five, which would likely make this immediate action a third-wave within v. It was noted yesterday that a measure potential target was up around 1683/84. Looks like that's where trade is headed.
The topping expectation came true later on May 22, when the market hit a high of 1686.73 and reversed sharply to end the daylike this:
From the intraday high of 1686.73, the S&P 500 fell 36 points.