Stocks Look Shaky Before FOMC Meeting June 2013:
Stocks are hitting resistance levels in a much more volatile week than most traders expected. Many market participants are hedging just in case Ben Bernanke uses the “T word” tomorrow, but how can Bernanke mention tapering as opposed to possibly expanding QE?
Chairman Bernanke has been explicit about targeting unemployment and it hasn’t budged significantly since November 2008. The May 2013 reading was an increase from 7.5 percent unemployment to 7.6 percent and as the job market becomes less worrisome, we expect the labor participation rate to increase. A sharp increase in the labor force participation rate could cause unemployment to rise above 7.8.
The S&P 500 has been bouncing within our technical range and we would be cautious if we saw strong downtrend with increased volatility. Japan’s Nikkei looks to hit 12,000 and we are not underestimating the crowded carry trade. We remain neutral on equities in the short-run and look for Bernanke’s comments as a new catalyst.