Reflections on Volume

Big volume without further upside equals distribution
Big volume without further downside equals accumulation

Volume tends to peak at turning points
Volume often precedes price movement
Volume is a relative study

Wednesday, June 8, 2011

Bernanke's Talk Kills Stock Rally

NEW YORK—A gloomy economic assessment from Federal Reserve Chairman Ben Bernanke erased an earlier stock rally, sending major indexes in the final minutes of Tuesday's session to their fifth consecutive drop.

The Dow Jones Industrial Average closed down 19.15 points, or 0.2%, to 12070.81. The blue-chip index has dropped 4% during its five-day skid, its longest losing streak since August. The Dow rose as much as 89 points Tuesday afternoon prior to Mr. Bernanke's comments, but turned negative during the remarks and finished at its lowest closing level since March 22.

The Standard & Poor's 500-stock index dropped 1.23 points, or 0.1%, to 1284.94, led lower by the technology and telecom sectors. The index, which has dropped 4.5% during its five-day losing streak, hit its lowest closing level since March 18.

The sharp reversal came after Bernanke offered downbeat comments on the U.S. economy. He said economic growth has been "somewhat slower" than expected, although he added that the recovery should pick back up in the second half of 2011 despite recent signs of weakness.

Mr. Bernanke also said the recovery two years after the end of the recession remains "uneven" and that conditions—particularly in the labor market—remain troubled.

"The market is not buying what Bernanke is selling," said Keith Bliss, senior vice president at Cuttone & Co., a brokerage on the New York Stock Exchange floor. "He's not wowing the crowd."

Mr. Bernanke's comments follow a drumbeat of weak economic data and worries that the recovery is running out of steam. The government's disappointing jobs report last week came on the heels of several weak regional manufacturing reports and consumer-confidence data that have fueled anxiety on Wall Street.

"[Bernanke] certainly seemed to be a little more dour on the economy," said Jay Suskind, senior vice president at Duncan-Williams. "If you had to classify it, it's more glass half empty than glass half full."

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