Major averages fell yesterday on higher volume after a Fed report accompanying Chairwoman's Janet Yellen testimony warned that "equity valuations of smaller firms as well as social media and biotechnology firms appear to be stretched." Stocks did manage a bounce after reaching their midday lows to close roughly midbar. Despite the bearish Fed report on stock valuations, Yellen did note that stock, real estate and corporate bond values are not stretched. She also sees the economy growing at "a moderate pace over the next several years" which implies the Fed will stay on track with regard to keeping interest rates unusually low for a prolonged period.
Nevertheless, over the last 7 trading days, there have been 4 days of distribution on the S&P 500 and 3 days of distribution on the NASDAQ Composite. Watch your stops closely as the correction that began several trading days ago may not yet be over. U.S. futures are up sharply this morning after Europe and Asia both rallied on positive economic news coming out of both regions. Intel (INTC) also beat on earnings last night and it is contributing to the outperformance in the NASDAQ futures.
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