Today’s Bull (shit) Rally

 The market was schizophrenic to say the least today. Last night the pre-market futures indicated an opening down about 200 DOW points. An early morning jolt spun the pre-market futures around and the stock market opened up 200 DOW points and held that through the day until about 2pm. At that time, the Fed came out with their statement. The first part of the statement was extremely negative.  Bernanke stated that the recovery was now a contraction and that it seemed as if recession was headed our way. The market responded swiftly and violently taking an up 200 day and making it a down 200 day in a matter of minutes. It just so happens that this low of the sell-off coincided with the low from the late night pre-market futures.

However, Bernanke was not through speaking. Although not confirming the rumors (hopes) that QE3 was around the corner, he did make the statement that the Fed would keep US Rates where they are- between 0 and .25 percent. The market took off on this news that rates would remain at record lows for the next 2 years.   The Dow recaptured the 200  lost  points and preceded to run up another 400 points, most of it in the last hour of the day.

This bull (shit) rally was most certainly an orchestrated event. Once Bernanke gave us the bad economic news, the market traded down hard and broke down through the all-important support level of DOW 10,800 which was pretty much the prior night’s close. With the breakdown  underway, the shorts hop in and push the market down hard due to the indicated technical breakdown of the DOW 10,800 support level. Now, with the shorts carrying the day, the DOW traded down to 10,600 which, as I mentioned, coincides with the low from the prior night’s pre-market futures. At that moment, the Fed makes the statement that they will keep interest rates right here where they are at record lows.

 The Fed did not say they would initiate QE3, which was the rumor that made the market bounce this morning in the first place. That is the moment when the PPT stepped in and started buying the hell out of the market. This started a massive short squeeze as the market traded back up above the all important DOW 10,800 support creating a “false breakdown” and the short squeeze really takes hold with the PPT buying the whole way up. Luck has it that the short squeeze aided rally was even able to get back up above a lighter but still there DOW 11,200 resistance.

 This coordinated effort, led by the Bernanke statement, basically eliminated the Treasury market as a wanted and even viable investment alternative for the next two years. The problem is that this move, although short term effective, is the same stupid crap that Bernanke pulled in 2008 to try to boost the stock market and build consumer confidence to help boost the economy. It did not work before and I doubt it will work again as more investors are “onto” the Fed and Bernanke’s games. And the stakes are higher now for the Fed and Bernanke and ultimately the US…….more to come on that!