The G has stepped in to guarantee the paper of Freddie and Fannie whatever the cost. While expected if the two mortgage giants could not stabilize, the action along with the other previous interventions amount to financial underwriting without peer. It will create a bizarre spread between the housing market, which will clearly begin recovery now, and interest rates, which will undoubtedly begin a rate climb for a variety of stimulative reasons primarily as overall demand for capital will climb in a environment where restrictive qualifications matter.
As to what this intervention means for stocks will be told by the trading action this week. The professionals are short especially in tech where a value play has created perceived downside opportunities in anything acting better than the rest of the market. More importantly, like all market traders, they do what is working and down has been working better than up. So if this market is turning, the brain function to turn down to up will bring more than a hefty rally, it will bring back the bull.
