12:25pm (EST)

There was a lot of tension heading into today’s speech by Federal Reserve Chairman Ben Bernanke as the bulls and bears were hoping for different results.  The bulls wanted possible hints of another stimulus package while the bears were hoping for nervousness and panic on the Fed’s part.

In the end, Big Ben didn’t commit to any additional monetary policy initiatives but said the central bank would discuss implementing additional monetary stimulus during its September meeting that will now last 2 days instead of one.  The Fed chairman also said Europe appears to be stepping up to the plate and should solve their problems while also saying Congress needs to take appropriate action to boost the economy.

Bernanke went on to say that the economy should grow at a faster rate in the second half of the year while the housing sector should resume growing in the medium term.  He also added the economic slump of the last several years shouldn’t have significant long-term effects on the U.S. economy and that growth rates and unemployment rates should improve over time. 

We aren’t sure how many times he has said this in the past but it seems like the same old rhetoric to us.  

The bears got an early jump on the news as Wall Street digested Bernanke’s comments and made a run at prior support levels but the bulls have rebounded as we head into the second half of trading and are pushing new intraday highs. 

Two things that we want to point out.  The market is still within the trading range we outlined for the week and the bulls are shooting for the upper end of the price targets we have outlined.  This would be Dow 11,350; S&P 1,175; and Nasdaq 2,500.

The bears will try to hold the Dow below 11,200 while targeting a close below 1,150 for the S&P.  For Tech, the bears will be happy if they can get the index back below 2,450 after tasting 2,400 on the selloff. 

As we head into the weekend, a close above the aforementioned levels would favor the bulls while a drop below support could lead to additional selling pressure next week.  Economic news will be heavy with month-end numbers being added to the mix and our feeling is the market could still go either way. 

Our “gut” feeling is the major indexes test the lows one last time and that we should see a bottom in September or October.  However, we have also said the bulls love to climb a wall of worry and any good news out of Europe this weekend could keep the momentum on the bulls’ side as they are in-line for the weekly win.    

The final hour of trading could be explosive as traders take positions ahead of the weekend but we wouldn’t be surprised to see a flat close considering the volatility we have already witnessed.

As we head to press, the Dow is up 138 points to 11,288 while the S&P is higher by 17 points to 1,176.  The Nasdaq is higher by 52 points to 2,471. 

We didn’t see the need to “rush” a trade today because we think next week will be full of opportunities to take advantage of the next leg lower, or higher.  The bevy of economic news that will hit the Street and the fact that some Wall Street traders (and Congress) are still on vacation will likely lead to more volatility which is great for trading options.

We will be back Sunday night with our Weekly Wrap and we encourage you to take a look at our Portfolios this weekend.  We have added some tabs at the top of the homepage so that you can access them more easily.  Remember, if you are a current subscriber, or if you sign up for our Daily newsletter this weekend, we are offering the Weekly Wrap at no charge until mid-September as we introduce new option trading strategies over the next few weeks.

Until then, have a great weekend!