The Bulls Get It Done

It was a mild day of action, but it is a victory for the bulls. With the news of the Fed increasing the discount rate and an extended market facing some key overhead resistance levels, the bears had some ammunition but failed miserably at pressuring this market.

Like last year, we have had another light-volume, V-ish move that seems to attract more buyers the more extended it becomes. Once again, it paid to ignore the skeptics, the charts and even some of the fundamentals and stay unwaveringly bullish. When the market acts like it did this week, nothing works better than just buying and holding on tightly.

I have to admit that I've been a doubter of the bulls' ability to keep producing this type of action, especially now with some signs that the Fed is mulling over ways to drain some liquidity from our economy. The logic of the bulls is that things are still way too slow for the Fed to raise rates, but apparently they aren't slow enough to hurt the stock market.

That is what is at the heart of the disconnect between Wall Street and Main Street. On Wall Street, the economy is good enough to keep stocks moving but bad enough to keep rates low. On Main Street, there is little economic growth, few new jobs and continued chaos in the real estate market. The only people who have benefited from all that cheap money created by the Fed are the folks who have plowed it into the stock market and kept it running up.

It is very easy to find reasons to distrust this market, but we must always remember to respect the price action no matter how misguided we may think it is. The bulls have been in control this week, and that is the most important consideration of all.......