Obviously, news events have been trumping the normal ebb and flow of market for three years in a row now. Any position taken on charts can be destroyed in the single swipe of a bad Tim Geithner speech, the refusal of Congress to pass TARP on first pass, or the vice versa-type of rescues. Traditionally, you look for a bottom off (a) a retest off old lows and/or (b) a sharp down day, followed by an intraday reversal - on volume - with a close at or near the highs. But those are the old rules. Now you just await a Sunday night bailout.
While the EU's "quantitative easing" is not of the US, UK, or Japanese kinds, reports this morning are that central banks are quickly buying government debt. This lays the groundwork for any of you worried about tiny issues like the trillion-plus ($2 trillion?!) pension problem in the American states [Jan 5, 2010: FT.com - US Public Pensions Face $2 Trillion Deficit], the Medicare unfunded liability, or any other problem. Answer: there are no problems anymore. When push comes to shove we now clearly see where all roads lie. Once a problem that's been ignored for years or decades hits a crisis point money will be printed and holes will be plugged. [Mar 12, 2010: Pappa Malmgrem Tells us What Foreigners Think America's End Game Will Be] Any and all worrying is simply for theoretical reasons. This is the no risk world and there are no limitations to spending. Frankly, I am upset a million dollars is not being sent to each American citizen this morning... just for kicks.
The biggest mistake I certainly made in the past 15 months was not realizing how powerful QE would be in the U.S. The rush of liquidity overwhelmed a market where there were actual net outflows of monies in 2009. And, since investors believe there is no risk, and the central bank has their back, they can buy at will and all dips must be bought.
I thought this morning I'd be writing about a gap but somehow, despite a 4% gain in premarket and due to Friday's immense intraday trading range, there was not a gap on the S&P 500 or Russell 2000 chart. Only the NASDAQ had a small one. So, I expect that if this is not filled very soon (i.e. today or in the next 2-4 days) it will be filled in 2-3 months, as that has been the typical pattern. (Click to enlarge)
Other than that, the only question at this point is when these major indexes will clear resistance of the 50-day moving averages they've all fallen below. Once they do the mandate by central bankers is clear: Keep buying, at any price, at any value. You must assimilate; fiat money is toilet paper.
Unlike my mistake in 2009, I shall be a good lemming and pile in once these moving averages are cleared as the "Bernanke Forcefield" now extends globally. Risk has been offloaded to Saturn and other celestial bodies; it's no longer a factor on Earth and, as speculators (or long biased mutual funds), we can only hug in glee.
p.s. Let me tell you, anyone with any sort of meaningful exposure to a short position this morning - or puts - can simply have an entire year destroyed.
p.s.s. Fannie Mae announces it needs another $9 Billion. No problemo... just print it.