Thursday, April 2, After Market Open

Despite all of the bad news with unemployment and GM, the market should continue to rally with the new accounting rules change announcement, which will allow the financial institutions to falsely make the claim they are healthy. Though a political move, it will drive financial stocks and the general market higher. I expect the S&P to hit 875 and the Dow to hit 8,400 within the next couple of days or week. Though the bears will put up a good fight, I expect the bulls to overwhelm them.

We have firmly slipped into the bullish pricing channel and above. The CPC and CPCE have turned bullish as of this writing, with the VIX still bearish. We are bouncing off resistance at 830 for the S&P and 8,000 for the Dow.

12:10 PM EDT Update:

The graph to the right provides the new bull market channel. The upper side of the red bear market channel will have to be determined by the bears as prices progress.

It is possible the bulls might break out of this channel and into the next channel higher later today. We'll see if the bears can stop them. There's a lot of volume today and I can't help but think the bears will run out of bullets.

12:45 EDT Update:

As a thought, it might be wise to bypass this rally today with the jobs report coming out tomorrow. If the market continues to rally today, a pull-back might be in order tomorrow after three up days. As I see it, the main problem is figuring out how to stay in the game as the rules change on a daily basis.

On another note, the Fed Reserve has shrunk their primary dealers to 15 firms today, which is the smallest on record as the the Fed continues to buy the long end of the bonds, all of which were 5 year notes. The Fed submitted $26 billion against $7.5 billion taken today while intentionally overpaying to drive interest rates lower, which isn't working.

This is what happens when the Fed can no longer find financing for its debt. It is now using short-term 5-year financing versus longer term debt instruments. The Fed and Treasury will eventually be forced to raise the offered coupon (interest rates), which was exactly what happened during "The Great Depression" and as it will exacerbate our current economic mess.

Here's what I consider an appropriate quote from Ayn Rand from Atlas Shrugged: “When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing - when you see money flowing to those who deal, not in goods, but in favors - when you see that men get richer by graft and pull than by work, and your laws don’t protect you against them, but protect them against you - when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed.” Does anything in the quote sound familiar?