Little bit of something for everyone in Mr. Bernanke's speech...on the one hand, those worried about dollar weakness were cheered by Mr. Bernanke's remarks that the Fed was "attentive to the implications of changes in the value of the dollar" and implicitly endorsed a stronger dollar.
On the other hand, Mr. Bernanke also noted that the dollar's weakness was merely a retrace of it's gain from the economic panic of last year, when the Dollar Index rallied 25 percent as the dollar became a safe haven.
Bottom line: stocks—and the dollar—are back to where they were before Mr. Bernanke's speech:
1) New high in the Dow Transports confirms the new high in the Industrials (this is a bullish signal under Dow Theory), and
2) S&P 500 over 1100 is a new high as well. This is important, because this is an options expirations week, and 1,100 is an important strike price.
Stocks are slightly off their highs on the Bernanke speech.
The Dow moved down about 30 points, from up 142 to up about 110, as a transcript of Bernanke’s speech at the Economic Club of New York came out about 12:10 ET.
Stocks were down due to a modest dollar rally. Bernanke said that the Fed is "attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability. Our commitment to our dual objectives, together with the underlying strengths of the U.S. economy, will help ensure that the dollar is strong and a source of global financial stability."
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