Fed Strategy Proves Effective At Pulling The Market Back From The Brink

Yesterday we discussed the lack of liquidity that was forcing institutional traders to sell even into the extremes. Once again the market was at the brink of collapse and the Fed and the Plunge Protection Team reeled it back in using something a bit different from a rate cut and perhaps something that has proven to be more effective; a new loan mechanism that re liquefied the economy with $200 Billion.

Yesterday's late day buying appears to be something more than just short covering. It looked to us like broad scale program buying. This potentially puts in a double bottom at the 200-week average and calls back into play a return to the 50-week average at $141.43.

Outlook:

With yesterday's high volume reversal we may have the start of a double bottom, which puts the 50-week average back into play. Volatility is expected to remain extreme and finding gems in the broader market is going to be more a matter of luck than skill. We suggest avoiding everything but those bullish areas that have continued to find a bid throughout this bear market; commodities, ag, and China.