All assets save the US Dollar took off to the upside in the after hours session on Wednesday afternoon as the Fed chairman reassured markets on the continuation of monetary accommodation during a question and answer period after a speech entitled, "The First One Hundred Years of the Federal Reserve: The Policy Record, Lessons Learned and Prospects for the Future", at a conference sponsored by the National Bureau of Economic Research in Cambridge, Massachusetts.
Here's a daily chart of the S&P 500 as of Friday's close:
1. The ascending trend line (white dashed) can be described as almost parabolic.
2. The grey area is the area inclusive of what are technically known as Bollinger Bands. The index is pushing out of the upper band and normally this is a signal of an over extended market.
3. The two momentum indicators above are flattening meaning the upside momentum is waning.
Let's look at the daily chart of the Nasdaq 100 which represents the top one hundred stocks in terms of capitalization on the NASDAQ:
I believe Mr. Bernanke's paper to be objective and accurate. I know there are many views on the Fed and many of those views are negative in sentiment. Mr. Bernanke obviously comes from the perspective that the central bank was and is indispensable in maintaining price stability in our economy and yet he unabashedly identifies past policy mistakes made by the central bank, especially during the Great Depression.
I urge those of my friends and readers who have an antipathy towards the Fed to read the speech if only to understand another position on the necessity of central banks in a fiat currency system.
There are more than a few authors who have made a ton of money capitalizing on Federal Reserve "conspiracy" theses. I've come to believe that all history is revisionist. Unless you have lived through the era that is being written about, you are bound to be influenced by any author's natural predilection on why events occurred. Sorting out conflicting theses by testing whether their consequences have withstood the test of time can assist greatly in sifting thru the historical noise created by authors and writers that have their own agenda (ie. making money).