Markets Wild As Bernanke Speaks, Dollar Whips

The U.S. Dollar was getting hammered pre-market, prior to the much anticipated speech by Federal Reserve Chairman Ben Bernanke. The technology was higher after Google Inc. GOOG reported earnings that beat Wall Streets estimates easily. The table was set for more quantitative easing talk by the Federal Reserve. Bernanke spoke for about thirty minutes. During that time, he discussed the need for more printing of money as inflation seems to be linked to 'good times'. In this humble Chief Market Strategists opinion, that is asking, which came first, the chicken or the egg. Yes, during good times there is inflation, but does inflation cause the good times or do the good times cause inflation? To be printing trillions of dollars and monetizing the U.S. debt in this manner is a risky philosophy if it is based on this speculation. Initially the markets spiked higher on the Federal Reserve Chairman's comments. Economic data followed with solid reports on CPI (consumer price index) as well as NY Manufacturing Index and Retail Sales. Consumer prices (CPI) increased for September by just 0.1%, analyst expected 0.2%. September's core consumer prices remained flat with no change This means inflation is sticking to the producer side (PPI) and has not yet been passed through to the consumers. Eventually it will. Retail Sales for the month of September increase to 0.6%. September's retail sales ex auto reports in at 0.4%. The New York Fed Empire Manufacturing Index for October comes in at 15.73. These economic numbers were all positive and the futures were showing a solid gain going into the start of trading on this options expiration Friday. The SPDR S&P 500 ETF SPY opened at $118.28, a big jump from yesterdays close of $117.46. No sooner did the market open, then it began to sell. The markets dropped for the first hour of trading hitting a low on the SPY at $116.76. This was on the back of a major bid by the Dollar. The ETF that measures the Dollar, PowerShares DB US Dollar Index Bullish UUP was trading at $22.10 pre-market. As the markets hit the mornings lows, the UUP traded as high as $22.32. This is a major reversal and rocked the markets. Since then, the Dollar has faded, coming back to the flat line and the markets have since moved back into positive territory. This market is pure and simple a Dollar trade. Earnings will and can help in either direction, but they will be trumped by the power of the U.S. Dollar. Gareth Soloway Chief Market Strategist www.InTheMoneyStocks.com