I’VE MOVED TO BEDROCK and all I got was a market rally…

Now that Irene has rolled through our hearts, TV’s and basements, it’s time to move on to more important events. No need to worry about highways that have evolved to oceans or the erosion of the fabulous Jersey Shore.

And please, you needn’t concern yourselves with my reversion to the Stone Age thanks to the absence of  modern conviniences like  electricity. My family is ready to be Naturalists. We have hunted and killed our meat. Told stories around the bonfire. Dug latrines. Had the kids collect wild nuts and berries like Euell Gibbons. I am currently hijacking the data feed of one of my neighbors who has wi-fi thanks to a NG generator. No, none of that is important to me, for I am obsessed.

My obsession is with the markets and how they interpret perception and reality. And these past one and a half days have seen a master at work. Regardless of what I think about moral hazard and the criminals of the banking complex, Dr. Bernanke has again put forth a masterful stroke. Without having to spend a dime or promise anything, he simply Jawboned some hope of future action towards more QE. Instead of black or white, he proposed grey and the market bought it hook, line and sinker. Usually the market hates uncertainty. But getting a flat “no” to more QE would be most unwelcome. Getting a “yes” right now would be politically untenable. But a maybe keeps hope alive and we got a maybe. That buys time and gives traders and speculators the cover they need to keep the “hope-ramp” alive.

I am unable to see my magic board that gives me the big, broad picture of everything that has occurred today becaue of my time travel to the Stone Age, but it appears to be a classic one-way, risk-on movement into equities of all types. In just one and a half days the major indices have almost made back half of what was lost in the August drubbing. Most everyone who bought a stock, ever, is pounding his/her chest in victory as the “shorts” run for cover. It is the new normal of very high volume to the downside and thinner and thinner volume as the markets work their way back to the midpoint of the new trading range. But don’t forget that it is the MONTH END the big, bad event is out of the way and it is Markup time.

It once again appears that the market is following the script mirroring last year almost to a tee. Before J-Hole in 2010, the markets traded in a range with a bias to the downside all summer. Once QE2 was suggested, the following Monday was a huge gap higher. This year is virtually the same except this year it was done a day or two early.

But we have seen the game of 100 SPX points up and down each week combined with extreme technical readings for weeks. And many will attribute this rally to stronger than expected economic numbers. Just wait until the August numbers are released as they will scare even the most ardent economic bulls because business literally froze for most of the month even though it was hot outside. 

Use the halfway point between the yearly highs and the recent lows in the major indices as your milestone.

 

 

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