The DJI and the SP500 indexes look to have their first winning month since October as they try to crawl out the trading range they entered on January 4 of this year. All the aggressive Fed action along with other hand holding measures have built a base upon which these markets rest. The Fed meeting this week is viewed primarily as a win win situation since any easing will not hurt and no rate reduction will be viewed as all is well. Jobs numbers at the end of the week will also provide opportunities to over trade.
This blog tends to look at the markets as a bull/bear battle probably because of this observer's years of pit trading and the daily struggle to place the market in a direction determined by spin and price. High balls, low balls during the price discovery grind has always a means to demonstrate counter directional potential. Now commodities are a different animal and are extremely small markets when one considers open interest and daily volume. Their current run is a demonstration of what happens when everyone piles into the same upside boat. No doubt, supply and demand of actual commodity users play pivotal part, but most of the open interest is simply about making a price play. Some of these plays are years in the making such as the drive to make Ethanol an alternative fuel source. Commercial grain companies and corporate farm interests have historically played the 'save the small farm' theme to enable continued congressional advancement of price supports for grain prices. The push into Ethanol is simply a continuation of the corporate welfare that has been always been a large part of agriculture.
The bale out of Wall Street is much like the subsidisation of the farm production. 'Let the big dogs eat' is the approach when constructing the financial rescues for corporate giants but always under the excuse for saving the rest of us.
So what is anything worth without intervention? The Fed's 'protecting the up' distorts values and risk profiles because the market, the bid/offer becomes a contrivance. The current situation protects primarily the principal market makers who screwed up. The bulls believe the intervention allows the markets to return to the normal 'up' as a reflection of the true value of things. The bears believes economic strength has been diminished by the magnitude of the event and it is better to take the bale out as an opportunity to dump the assets.
