Dr. Bernanke, the Federal Reserve and the German Constitutional Court follow Mario Draghi to center stage
Last week was all about Mario Draghi and the European Central Bank stepping up to buy bonds in an attempt to defuse Europe’s ongoing debt crisis. The action electrified markets and now market players turn to Wednesday’s ruling by Germany’s high court and Thursday’s FOMC meeting and Bernanke press conference.
On My ETF Radar
Chart courtesy of StockCharts.com
In the chart of the S&P 500 (NYSEARCA:SPY) we can see how the index blasted through all near term resistance levels to log an “ascending triple top breakout” on August 7th. This is a very powerful buy signal and would point to still higher prices ahead. Near term support is at the 1340-1360 level and a descent below this level and the blue bullish support line would indicate the end of this current rally.
Point and figure charting methodology points to an upside target of 1550 on the S&P 500, (NYSEARCA:SPY) approximately 7.9% above current levels.
Standing on The Economic Summit
U.S. stocks and ETFs hit multi-year highs last week, going as far back as December, 2007, for the Dow Jones Industrial Average (NYSEARCA:DIA)) and January, 2008, for the S&P 500 (NYSEARCA:SPY)
For the week the S&P 500 (NYSEARCA:SPY) jumped 2.2%, the Nasdaq 100 (NYSEARCA:QQQ) climbed 1.9% (its highest closing level since November, 2000) and the Russell 2000 (NYSEARCA:IWM) soared 3.7%, a 116% gain from its February, 2009, closing low.
Gold (NYSEARCA:GLD) remains in strong rally mode, up 2.7% for the week and 12.8% from its mid-May low.
Economic reports were mixed with August Non Farm Payrolls disappointing with a missed estimate and new jobs declining to a mediocre 96,000 for the month, down from 141,000 in July. However, the monthly unemployment rate declined to 8.1% from last month’s 8.3%, but this was mixed news as 368,000 people stopped looking for jobs and so are no longer counted.
News from Europe was relatively more positive with gains in German and British industrial production.
So now we look ahead to next week and the pivotal events on Wednesday and Thursday. If the German Constitutional Court nixes Germany’s involvement in the European Stability Mechanism, this will be a major bucket of cold water on global financial markets as Germany’s participation is key to the success of the European rescue fund.
The second big event is the FOMC meeting on Wednesday and Thursday which includes the Committee’s statement and Dr. Bernanke’s press conference on Thursday. Thursday holds the potential for high drama as more quantitative easing is widely expected and any disappointment here could likely trigger a sharp sell off in global risk assets.