By Nicholas Santiago on February 24th, 2010 3:28pm Eastern Time
Today was a very interesting day as the Federal Reserve Bank Chairman Ben Bernanke testified before Congress. The usual grilling came from Congressman Ron Paul(Texas-R) who is trying to get the Fed to audit their books and monitor their loan activity. The rest of the U.S. Congress seemed very soft and mild mannered with the questions asked to the Chairman.
The markets seemed to rally as the Bernanke testimony began and remains higher as of 3:00 pm EST. This rally today comes even as the U.S. Dollar is trading near the flat line on the day after an initial decline at the start of the session. Generally, when the dollar is higher on the day the market is usually lower. This is not the case today as financial stocks such as Goldman Sachs (NYSE:GS), and J.P. Morgan Chase (NYSE:JPM) are strong today leading the markets higher. There are also many strong energy stocks that are trading higher on the session. Stocks such as Exxon Mobile Corp (NYSE:XOM), and the U.S. Oil Fund (NYSE:USO) have traded higher despite the strong intra day dollar bounce.
It is important to remember that the catalyst for the 2009 rally was the falling U.S. Dollar. Often when the trading volume is very light the dollar does not have the same inverse negative effects effect intra day on the stock indexes. However, should the dollar decline the market is likely to trade higher as most commodity stocks will rally. The dollar can be traded by using the Powershares DB Dollar Index (NYSE:UUP) for long trades, and the Powershares DB US Dollar Index (NYSE:UDN) for short trades.
Where does today action leave us? This type of action is much like the month of February. It rallies higher on light volume and sells off on heavy volume. One can only expect choppy, sideways action into the end of the week, however, the month of March could see fireworks.
Nicholas Santiago
Chief Market Strategist
InTheMoneyStocks.com
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