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After Early Weakness, Markets Fly Higher

The markets gapped higher and sold sharply into key comments by Ben Bernanke.  Within minutes of those comments, the market started to rip higher and was off to the races.  I will explain why.

The market had sold into the close yesterday on worries that the GDP revisions would come in well below the estimates of 1.4%. That would be a revision lower from the 2.4% originally reported. In addition, the market continued to be very fearful of what Federal Reserve Chairman Ben Bernanke would say at 10am ET. With the futures trading flat this morning, GDP came in at 1.6%, a revision down from the first estimate but still higher than the expectations.  The futures ripped higher.

At 9:30am ET, the markets opened with a gap higher yet quickly sold again. Worries over the Ben Bernanke comments still haunting the markets. At 9:55am, University of Michigan Sentiment was reported at 68.9, fractionally lower than expectations.  This however, was a non event as Ben Bernanke was just five minutes away.  Within 3 minutes of Ben Bernanke, the markets got a curve ball. Intel Corporation (NASDAQ:INTC) warned that the third quarter would miss expectations.  The SPDR S&P 500 ETF (NYSE:SPY) dropped hard, flushing out towards the key $105.00 level.

Then the comments from Ben Bernanke were released. While not good, they were not as bad as the market had feared. Initially, with the INTC news included the markets dropped hitting the double bottom from August 25th to the penny.  No sooner had it touched that double bottom, it reversed and headed higher. At the highs of the day it stalled, consolidated, then rallied higher again to the 200ma on the ten minute chart at $106.40.

The markets are no pausing again as volume is getting lighted. Truly a wild morning though the markets are not starting to trade in the normal Friday in late August fashion.  It is expected that the markets will remain sideways in this range the rest of the day.  Note the SPY chart below.  If you are interested in hardcore analysis, guidance, swing trades and education, join the Research Center.

Gareth Soloway
Chief Market Strategist