Major averages closed higher on lower volume. Federal Reserve chief Ben Bernanke made a couple of negative remarks on Friday, intimating that regulators might soon need to increase banks' capital requirements while also discussing the fact that while money-market funds were strengthened by 2010 reforms, "the possibility of a run on these funds remains." Nevertheless, this did not seem to distract the market from its continued uptrend.
The dollar has moved up sharply over the past two days while Treasury bonds have been under pressure for the last six trading days, possibly on talk of the Fed mulling over how it will scale back and eventually exit QE. In our view, while the Fed could scale back purchases by $10-15 billion a month at some point in the near future, we don't believe that QE is likely to come to a complete end any time soon. Furthermore, the U.S. economy remains in a tenuous state, and the possibility that a suddenly robust economic environment will in be able to "carry the ball" on its own, so to speak, strikes us as somewhat remote. The markets themselves will likely begin to signal the end of QE before the Fed makes a definitive decision to end QE, or at least scale it back substantially. Thus the market's price/volume action remains our first point of reference.
3D printing company Stratasys (SSYS) is looking to gap up this morning after reporting strong earnings pre-market. We reported on the pocket pivot buy point issued by SSYS on Friday during trading hours.