Diminishing Returns: Bernanke Juices The Markets
The U.S. markets awoke on Monday morning to find Federal Reserve Chairman Ben Bernanke giving a speech on the economy. Any speech where he leaves the possibility of more QE (quantitative easing) on the table helps the markets jump. Today was no different. The futures took off as he spoke, surging off of the worst week in the markets since December 2011. This was a classic chess move to help the markets survive and stay afloat. While off the highs, the SPDR S&P 500 ETF (NYSEARCA:SPY) is trading at $140.96, +1.27 (+0.91%).
At every turn, Ben Bernanke refuses to take more QE off the table, regardless of the economic strength. Investors continue to believe he will juice the markets like a addict with drugs. However, the duration of each market pop is getting shorter and shorter. In other words, there is a diminishing return to the word of Bernanke.
Ben Bernanke has shown he will go the extra mile to help the stock market go higher. While it ultimately will end in a bubble collapse, he shows no fear. Based on the move today, smart traders are watching to see if this move higher in the SPY will take out the 52 week high at $141.28. In addition, can it last longer than one day. These will be keys to understanding the sustainability of the rally.