Well yesterday was fun wasn't it? For a second there in the morning I could have been caught cursing at my computer screen. After watching the ridiculous skyward move after Bernanke started speaking I actually felt myself begin to capitulate on the short side. I just couldn't take it anymore, the irrational exuberance that is. I had to ignore my computer screen for a bit. By the time I came back, lo and behold the market was actually trading off a bit. There was hope after all. I am so fed up with the Fed and the way they are manipulating this market.
I actually tweeted yesterday that I wouldn't be surprised if we would be up today, if not significantly. Who knows if it is just another one-off event? No one REALLY knows what Bernanke is going to do but himself (actually I don't even think he really knows either). Everyone will continue to postulate theories about why he will or won't continue with QE. I am still in the camp that he will not taper QE anytime this year. The market may get a slight pullback (2-4%) before the Fed's next meeting, just in time for Bernanke to have a more dovish speech to send the markets to new highs. It is interesting to see how the Nikkei reacted to Bernanke's speech along with the FOMC minutes, it was down over 7% last night.
So what do the bears have going for them? Nothing really. Besides a slight break of an upward channel since the beginning of May. Longer term trends are still upwards as we reach support levels. It is going to take more than a one off event like yesterday, or even a down move today to spur any more panic selling. So after his speech does this mean bad is good, good is bad, and horrible is great (depending on who you think actually controls the markets of course)?
Yesterday reminded me of an experiment that I had read about before. A guy is in a somewhat crowded area outside of a building and decides to stand in line behind a random door. Within minutes, people start lining up behind him, not even knowing what was inside the door or why they were waiting in line. Before he knew it, a line had formed around the block behind him. The moral of the story is that people tend to do things even when they don't know why they are doing it. The shoot first and ask questions later type of mentality.
Hopefully this will be the return to an actual market. We are due for one.
As I write this the markets have bounced pretty significantly off the lows with the DIA only trading off by about 0.2% and SPY trading off 0.5%. The VXX tits is up marginally. Looks to be a hold your nose and BTFD type of day.