Bernanke pre-empted by Dudley: Will he throw it back into Congress' lap?

Bernanke, in his written testimony, confirmed what Dudley and others had already said: That premature tightening of monetary policy could stall the recovery.

But how about this: How about a more aggressive Bernanke, one who insists that the Fed has done all it can, who turns the tables on Congress and insist that lawmakers begin addressing the fiscal issues?

Bernanke hinted at this in his written testimony, but let's hope he is more assertive in the Q&A: "To promote economic growth and stability in the longer term, it will be essential for fiscal policymakers to put the federal budget on a sustainable long-run path."

It's no secret most of the Street has been trying to anticipate--and trade ahead of--the anticipated Fed "tapering" of bond purchases.

Separate speeches today from the New York Fed's William Dudley and the St. Louis Fed's James Bullard have thrown some hot water on that thesis.

Mr. Dudley came right out and said that the Fed might adjust the pace of bond purchases up OR down; that the outlook was uncertain, and that he wasn't sure what way the Fed would be leaning.

Traders seem desperate to spin every Federal Reserve pronouncement hawkishly, so everyone will be listening for clues about possible tapering of quantitative easing when two Fed presidents speak later on Tuesday.

St. Louis Fed President James Bullard plans to speak at 11:30 a.m. EDT from Frankfurt, and New York Fed President William Dudley, who is a dove like Fed Chairman Ben Bernanke, will speak at 1 p.m. EDT at the Japan Society in New York.

Other than that, markets are likely to be quiet ahead of Bernanke's testimony on Wednesday. There will be the usual questions: When will the Fed start to taper its bond purchases? What would prompt the Fed to increase its purchases? Are the past few jobs reports really a "substantial improvement" in conditions?

The big event this week is Wednesday, when U.S. Federal Reserve Chair Ben Bernanke testifies in front of the Joint Economic Committee, while the Fed releases the FOMC minutes to the April 30 and May 1 meeting.

The markets were all aflutter last week as John Williams from the San Francisco Fed (a dove) indicated he wanted to taper off purchases sooner rather than later.

But Bernanke is likely to reiterate exactly what he said at the May 1 meeting: that they are "prepared to increase or reduce" their bond purchases as the labor markets or inflation outlook changes.

(Read more: Bulls Will Be Driving Market, but Bernanke Is Steering)

The first quarter earnings season is mostly over, but next week we get the last wave of reports from retailers...that's because most retailers report on a February to April quarter.

So we'll hear from Home Depot, Best Buy, Saks, TJX, Lowe's, Gap, Target, Ralph Lauren and Autozone.

Big Data's first IPO is a big one. Tableau Software opened at $47, after pricing its initial public offering at the NYSE at $31. The initial price talk was $23-$26, then it went up to $28-$30, before pricing at $31.

(Read More: Big Data's First IPO Is a Big One)

Wait, there's more: the initial offering of 7.2 million shares was upped to 8.2 million shares. So instead of pricing 7.2 million shares at $24 (the mid-range) and raising $172.8 million, they priced 8.2 million at $31, raising $254 million.

Tableau Software (DATA) priced its IPO at the NYSE at $31. The initial price talk was $23-$26, then it went up to $28-$30, before pricing at $31.

Wait, there's more: the initial offering of 7.2 million shares was upped to 8.2 million shares. So instead of pricing 7.2 million shares at $24 (the midrange) and raising $172.8 million, they price 8.2 million at $31, raising $254 million.

(Read More: Fed's Williams Gets Markets Moving)

Not bad, eh? A software company? It's simple: Big Data. It's the new magic word, like "cloud computing" was a year ago. Their software allows customers to analyze large data sets using proprietary drag and drop commands. The company's description of what it does is refreshingly free of a lot of the jargon terms that characterize so many company descriptors. They help people see and understand data, to quickly analyze, visualize and share information. Get it? And no leveraged buyout here.

Stocks weakened shortly after 3 PM ET as the President of the San Francisco Fed, John Williams, said the Fed could begin easing up on bond purchases later this year.

So? Is this a surprise. It's important because Williams is a dove, which is why his comments are generating interest. Remember: there is a substantial community that believes the Fed is going to taper their purchases in September....and have positioned their portfolios accordingly. Traders with this view are seizing on anything that support their position. Talking your book, anyone?

But hold on. For one, Williams is not a voting member of the FOMC.

Second, Williams made it clear that the barrier for reducing purchases was a high one: "It will take further gains to convince me that the 'substantial improvement' test for ending our asset purchases has been met," he said.

Substantial improvement? Though Williams says the economic outlook is "clearly improving," you'd be hard pressed to see it this week. The economic data is going in the other direction! From May Empire and Philly Manufacturing, to April Industrial Production and Capacity Utilization, to today's April Housing Starts and higher Initial Jobless Claims, the data has been terrible this week!

Here are other headlines from his comments:

JOB MARKET STILL HASN'T MENDED ENOUGH TO END BOND BUYS

EVEN IF TAPERED, BOND BUYING COULD BE BOOSTED IF NEEDED

Get it? He's repeating what Bernanke said...if things get worse, they will ramp up, not down.

The markets continue a slow melt-up, but it suggests we are getting into overbought territory. One simple indicator would be the S&P 500 Index, which at 1,658, is now trading 12.1 percent above its 200-day moving average — that is a very rare occurrence.

A simple rule of thumb I've used is that the market is getting overbought anytime you get above about eight percent over the 200 day moving average, and certainly above 10 percent.

Another close, another new high for stocks.

Some observations:

1. Bonds getting hurt, with iShares 20 Year Treasury Fund (TLT) down 4.7 percent this month...but surely speculation the Fed will be lightening up its bond purchasing program...perhaps as early as September...is a negative for stocks?
   
2. The U.S. Dollar Index is rallying, up 2.6 percent this month, but instead of being viewed as a sign that the U.S. economy is improving, most traders are viewing this as an indication of an intensifying global currency war.
   
3. Commodities, particularly base metals are having a terrible year, with copper down 11 percent, aluminum down 10.8 percent, zinc down 12.3 percent. Hardly a vote of confidence in the strength of the global economy.
   

What do these contradictory cross-currents mean? This is what happens when you get global zero-interest-rate policies and QE3. You get strange distortions.

And stocks at new highs? The favorite phrase on the floor is TINA: There Is No Alternative.