Major averages fell on higher volume. Federal Reserve Chairman Ben Bernanke said on Wednesday that the central bank may start to scale back its asset purchases later this year if the economy continues to strengthen. The Fed forecasts that the unemployment rate could fall to 6.5% by 2014, one year sooner than the central bank had previously estimated. Futures are currently down nearly 1% while global markets have been selling off in reaction to Bernanke's comments. Downbeat China manufacturing data added to the negative tone. That said, the economy is still anemic and speculating on the direction of the economy months into the future can be tenuous at best. The fact remains that QE3 will remain on full blast until the economy shows definitive strength, something that could be months away. Thus the current uptrend could very well continue as it has during QE1 and QE2 after the market stumbles around in the process of digesting the Fed Chairman's words. Signs of economic strength in the days and weeks ahead, given Bernanke's testimony, would, however, likely to add to the selling pressure, while, conversely, weak economic news could support the market. Overall, this could make for a continued choppy range throughout the summer.
Drug manufacturer Valeant Pharmaceuticals (VRX) had its second pocket pivot in two days yesterday after completing a 23.5 million share secondary offering which was priced at 85. VRX stalled a bit on yesterday's pocket pivot, but not as badly as it did on Tuesday. Tuesday's stalling was likely due to the secondary offering while yesterday's stalling was likely due to general market conditions. Nevertheless, the stock did close up yesterday in the face of a sharp market sell-off and overall continues to look strong. Institutional sponsorship has climbed over the last 4 quarters, while VRX's industry group comes in at a strong #38 out of 202. VRX recently acquired Bausch & Lomb Holdings Inc.. The company expects to achieve at least $800 million in annual cost savings by the end of next year due to the deal, which is also expected to immediately boost cash earnings.
LinkedIn (LNKD) traded enough volume for a pocket pivot buy point off of the 50-day moving average, a "bottom-fishing" type of pocket pivot as the stock tries to come up the right side of a potential new base.