Ben Bernanke speaks..

The market bounced this morning which was not a surprise and I mentioned that it may happen in the pre market report. But what turned this reaction bounce from just that into an emotional orgy was a letter that was released by Ben Bernanke and in that letter he basically said that the FOMC would do whatever is needed. And as the markets always do they read between the lines and are now thinking that the FOMC will cut the Fed Funds rate. This guy Ben Bernanke goes from hot to cold and back again.

Is the letter that Ben Bernanke released today the equivalent to nothing more than "a lap dance" at a nude bar or does he mean business? In the commentary last night I said that the big drop yesterday was fueled by speculation that the FOMC did not understand the scope of the problems and that made traders think there would be no cut. Then today he makes people believe that he will. Again I say, is it a tease or will they restore order to the markets?

I stand firm in my commentary last night that there are more problems coming down the road which have not been fully absorbed by the markets yet and the rate cut may only be a temporary fix for the markets. It depends on how forceful a rate cut (if they actually do one) and the statement that goes along with it. Yesterday the market was in depression as the facts of the economy and the fear there would be no rate cut sunk in and today it was party in the streets thinking that "there is a Santa Clause" (ie: letter form Ben Bernanke).

What we don't know is if this emotional lift will translate into a logical lift. What that means is on one hand there was excitement which ran the market up in the afternoon. Will that excitement fade back to reality and we come back down again? Or will the perception of a rate cut bring large money back into stocks?

On one day we are down huge, the next day we are up huge.. this is why we can't swing trade in this emotion driven market.. We need a market that is driven on at least some logic, and not all emotion.

What did today's moves do as far as support/resistance.. well think of it this way. We are in a S/R sandwich. We still stuck in between greed on one side and fear on the other. And it is like peanut butter and until we can move decisively out of the S/R sandwich then we are going to continue this up and down swings.

More later..