Don’t fear the reaper, and Don’t fight the Fed

If the market climbs a wall of worry, this is a high wall indeed we’re up against. Based on Thursday’s turn-around hammer day and Friday’s vault higher, investors definitely are betting Bernanke blinked and will be easing rates from here. Every time interest rates are at the end of a prolonged rise, the Fed waits until something breaks before they start loosening again. It all seems pretty well engineered. With fifteen months to elections, the markets ought to be in full gallop higher, once again proving the four year cycle is alive and kicking. If I’m wrong about that timing it’ll cost me real money because I used the weakness this week to put on some long positions on stocks that had held up pretty well. No doubt, I’ll have to dump some holdings if the market hasn’t really bottomed, but going against the crowd can be rewarding if done right. I’d been watching Money Center Banks and Brokerage stocks for a turn signal and we got the Bernanke bounce Friday, after Thursday’s deep head-fake down then rally into the close. The next test will be recent highs, and I’m sure the shorts will be out sink the market again, but the Fed has signaled they’re here to help, so the shorts will have that to worry about.