Ben Bernanke testified before Congress this morning, and while this dialogue was widely anticipated, it has been a nonevent to this point. Futures were flat early this morning, rallied into the questioning, but have since traded in a very choppy range. The biggest movers on his remarks were the macroeconomic assets, as the dollar initially sold off sharply, but has since stabilized. At current levels, stocks are slightly higher, with the Russell 2000 leading once again, up by about 0.5% on the session. Today’s laggard is the Dow, up only 0.1% amid weakness by Caterpillar (CAT) and Hewlett Packard (HPQ). Bonds are slightly higher today, while metals are cooling off a bit after yesterday’s big move higher. Currently, silver is 3% lower, while gold is off 1.2%.
CHART OF THE DAY
Deere & Co. (DE) – The farm machinery concern has been weak this year, down by about 3% since January. Despite its weakness, sentiment toward it remains very bullish. The shares recently rallied into their year-to-date breakeven level, which happens to coincide with a bearish gap from 6/20, and failed at that level. This could act as resistance going forward. Also, the chart of DE is showing a “death cross” formation, which is formed by the 50-day moving average piercing the 200-day moving average to the downside. This is another indication of potential weakness going forward, and offers a nice bearish entry here.
I like a bearish entry with a stop on a close above 86. I would initially target a move down to 80, with 75 as a stretch target.
WHAT I’M EXPECTING
Continued choppy action in indexes. There isn’t much in the way of economic data for the next two weeks, and the Summer lull could definitely continue. There remains a ton of opportunity in individual equities, however, as correlations are at multi-year lows.