Three major markets we are watching today – S&P 500, Gold and Crude Oil futures – are all experiencing reduced volatility and slight profit-taking before Ben Bernanke’s Jackson Hole speech, which will occur Friday morning. Q2 GDP (2nd estimate) was released this morning and the actual number was .1 higher than the estimate. Needless to say, the more positive economic data that comes out, the chance of the S&P 500 rallying increases. We stick to our point that the S&P 500 is NOT totally dependent on what Bernanke will say on Friday. The Fed has done quite a bit of work on stimulating the economy and we feel the market doesn’t necessarily need an abundance of more stimulus to rally. We may get back to a more ‘normal’ market environment of the S&P 500′s movement being more dependent on actual economic data vs. being dependent on the words and actions of the Fed.
We focus our analysis today on the crude oil futures market. Like Gold and the S&P 500, Crude Oil futures are experiencing slight profit-taking and consolidation this week leading up the Friday morning’s speech of Ben Bernanke. We mark a key pivot level of $91 in this market. If crude oil futures (OCT12) stay above this key support level, we look for an extension to $103. The logic of this idea is that crude oil rallied $15 from its June low of $78 to $93 in the following month of July. Another similar $15 rally from its recent swing low of $88 would place the upside target at $103. Again, we are watching our pivot level of $91 very closely. Crude oil seems to have been building strength and we would not be surprised that if economic numbers continue to be bullish and even if Bernanke is slightly positive towards more stimulus, we will look for our target of $103 to be hit.