Earnings season is right around the corner and you can guess that there will be some mediocre results. In fact many earnings expectations have been tempered recently as has GDP estimates. But you can guess that forward guidance will be “optimistic” in order to help justify the current rally and to keep it sustained.

Some market prognosticators are postulating that the markets are up over the past few days because inflation has peaked. Remember, it was the inflating assets, bought with the cheap QEII capital, that helped levitate the markets back to where they were before the Credit Crash and served to “balance out” the deflationary forces of bank holdings.

You cannot have it both ways. Either inflation is good for stocks or it is bad for stocks. In this environment it has been good, but only for stocks and commodities and not for anything else. But these past few days of market rally have been thanks to the end of the quarter. The mark-up in high-beta and momentum stocks is shameless. Tape-painting is now illegal, but only when it is to the downside.

So enjoy the end-of-the-quarter and our “Flag Waving Holiday” rally to SPX 1307…

This stock has clearly been the “smart money”. having discounted the current economic slowdown. Now it may be time to accumulate for the perception and expectation of some stabilization or even a pickup in activity.

Sentiment and fundamentals are clearly reflecting widespread negativity. But technically it is ripe for accumulation having pulled back to major multi-year support.

Study this chart carefully because it is the single most manipulated “investment” product in the world today and it just so happens that technicals actually work for price forecasting.

In 2008, while other commodities were flat, this zoomed to $145 because it was the only thing that was “working now”. It then crashed with the rest of the world. But then it recovered rather quickly, just as our President kissed their King. Coincidence?

And then, as every other “investment” began to run higher on the back of trillions of dollars in Quantitative Easing, oil was flat. It simply didn’t move except in the narrow trading range between 75-85. It wasn’t until the “Arab Spring” that prices were subject to fear and financial intermediary hoarding, plus a bit of QE induced hysteria.

Now the Administration needs commodity prices and primarily oil prices to fall in order to prevent another economic blackout. So what do they do? They release oil from the Strategic Reserve to manipulate prices lower. No issue that there is already a glut of oil on the market and demand is actually down. Market manipulation in its most brazen form! Have they no shame?

I want artificially levitated prices of financial assets to correct to their true price discovery, but that would hurt too many banks and investors. So how about instead of blatant manipulation of markets the government simply institutes sound rules that prevent massive price dislocations and egregious misallocations of capital. Would stable markets help stabilize the economy? Lets find out…

So there you have it. Anything materials related is being liquidated in order to satisfy Dr. Bernankes “inflation is transitory” analysis and the money is being funnelled into the highest Beta that can be found. Even with all this noise and fury, NYSE volume is less than 500m shares at 1:30pm.

Remember how last week you were told to stay away from anything related to technology? Well, guess where the money is going? To all manner of tech, that’s where! Beaten down semis, PC’s, disk drives, memory, and anything classified as heavily shorted or  Momentum-oriented.

This rotation will be seized upon by the media and you will be told how fabulous technology is doing, both technically and fundamentally. But by then, the advance will be 75% finished and the public will buy at the top of the range, again.

Hedge Funds liquidating commodities because they were too leveraged? Europe on the brink (again)? The release of oil from reserves? A debt ceiling impasse? Markets giving back the four day recovery in one bar? Dr. Fly posting his famous charts?

WTF is going on today? It is something. I’m not sure what and I don’t care to speculate publically, but with month/qtr. end,  I would tread lightly with funds at the ready to buy a potential “flush”.

So many investors and traders are busy trying to find “what is working now”. But chances are what is up today is finished going higher.

Sometimes it takes a low volatility idea, with both fundamental and technical drivers, to win the day, all the while maintaining a low-risk profile. LLL has been just such an idea. Here is a chart update from January of this year. The stock is currently trading above $86, a 23% gain.