At April 30 I’ve posted “Kiss this rally goodbye“. Well, I was wrong by 2 days and 18 points in the S&P. I’ve said that the peak will be 1404 at April 30 but now it looks like the real peak was fixed at 1422 at May 2 (both intradays). After yesterday 3.5% carnage in financial stocks they are tumbling by another 2% today. Financial sector is a leader in rallies and falls, so we won’t see that May 2nd 1422 level for months and, who knows, maybe years or even many years.
What happened? In this post 2 days ago (and the follow up discussion) I’ve suggested that Feds will have to make sacrifices in order to save the bond market. That had to do something nasty to scare the money out of stock market into bonds. My proposal was that the Feds will either suggest that they will allow Countrywide to fall or they will hint of possible rate hike.
Yes, they made a hint that the rate hike is possible, that worked very well – I was right. Second, the SEC declared that investment banks will now have to disclose the liquidity levels. That worked even better. The market is tanking exactly as Bernanke wants it to.
Yes, we know that Bernanke put exists for the bulls. Now we know that Bernanke call for the bears exists as well. Those who think that he will allow the stock market to rise at the expense of the treasury bonds are terribly mistaken. He will make all necessary sacrifices