All the selling, the asset destruction, the bone-chillling worry about our “credit rating” is percieved to be over, done, finished with a raucous sell the rumor/buy the fact, one hour rally.

The FED’s helicopter came out and guaranteed that interest rates will “Go Japanese”. Few believed that interest rates would or could much lower, especially because of S&P, but now it is clear that we should all be ready for a 2.5% mortgage, if you qualify.

We have made back a perfect .68% of yesterday’s historic drop and the average stock ramped between 5-15%. It was wild day, traversing almost 1000 Dow points counting all the intra-day swings.

Even though prices are much lower than where we were two weeks ago, the fear of going to zero has come off the table. The Wall Street Complex wins again!

Just remember, equities reflect the true measure of a companies worth on a day to day basis! NOT

After yesterday’s “Bid Wanted” close and a down 20 point SPX pre-market, it is an amazing fantasy that the SPX has reversed over 50 points from the pre-market lows.

The buying began in Australia and worked its way around the world, so when we awoke, futures were up 20 SPX points. It is certainly a welcome relief from the endless hitting of the bids, but there is something very “tin foil hat” about it all.

With Bernanke and the FED meeting today, many expect that they will go “all in” after the last few weeks of market action. My friend, Fargojim pointed out today that the Fed has truly failed their mandate of price stability and employment. Yet they control the world and everyone waits on their decision.

2:15 looms especially large today.

There is no doubt that many stocks are very cheap. But I would err on the side of caution in this highly volatile market

It cost $50 billion a month but the Federal Reserve kept prices up and hope alive.

My one prediction for the year was that this year would be a carbon copy of last year. Up until today we had followed the script almost perfectly.

Remember last year after QE1 ended? The SPX and Nasdaq had a significant correction and EVERYONE just KNEW we had to crash as the A-Team came back from vacation. THE CRASH WOULD HAVE HAPPENED LAST YEAR if not for QE2! But Bernanke promised the free money and it was enough to keep the balls juggling and the prices levitated.

As QE2 ended, most market participants were confident that there would be another free money stimulus. But few bet on the most fractious government in our lifetime. Now, a month after QE2 ended, the market has given up on the hope for more free money and everyone is running for the doors. “Investors” all ran into the marketplace acting like puppets on a string, doing exactly what the Fed needed them to do. There was no respite. There was nothing but dip buying and not even earthquakes, nuclear fallout or revolution could dissuade them–until the free money ran out.

So now they all follow the Pied Piper over the cliff. Technicals are only a guidepost in the most informal manner. You must let the fools and knaves out of the market as they all must leave simultaneously. We are nearly down 20% in a few weeks, a modern day crash.

Look, the Quantitative Easing rescue plan might have worked, but its architect neglected to perform the necessary prelude and first step toward the successful implementation of the stimulus: Reorganizing the bad debt. Until that is attempted in some meaningful way, our economy will go nowhere.

It has now been PROVEN that Quantiative Easing, which was designed to boost asset prices to combat deflation, was an abject failure that did far more harm than good.

The boost in prices brought about by QE took prices to where they had no business being, for both stocks and commodities. Everyone piled in and once the stimulus was complete, reality sets in and just a month later we are crashing. You are now witnessing the effects of false prices, misallocation of capital, market manipulation and outright fraud perpetrated by the Federal Reserve and the Treasury Department. Forget about how high prices hurt the economy. The destruction of capital is a far more dangerous phenomenon.

Sure, clamping down on government spending won’t help a thing and sure we’ve got some serious spending problems. But prices of financial assets SHOULD HAVE NEVER BEEN THIS HIGH and now we are witnessing the newly created capital going to money heaven. This has been my thesis for months and I’ve had a SPX 1200 target. But in this one-way market, where its all in or all out, things go faster and farther than anyone could expect.

The market won’t be happy until all of QE2 is given back. Remember this?: THE BULL MARKET IS DEAD

Posted last Thursday in the late morning. There is a lot of information in the chart. Please take a minute to review. You can find these charts only at www.createcapital.com

After dropping about 1000 points, big support starts RIGHT HERE near 4500 with risk to 4100.