The lesson is....don’t fight the Fed -- even when it isn't very clear and hasn’t done anything.
The release of the minutes of the August meeting of the Federal Open Market Committee (FOMC) indicated a fair amount of disagreement among the members. But the market decided that QE3 is coming sooner or later and that was all that was needed to squeeze the market higher. Any talk at all about quantitative easing lights a fire under the market as the bulls have very fond memories of what happened last year after Ben Bernanke announced QE2 at the end of August.
We also saw what looked like some pretty obvious end-of-the-month window dressing in big-cap names, including PCLN, BIDU, LVS and UA. Window dressing tends to peak on the day before the last trading day of the month and that sure looks like the case today.
Interestingly, the market completely overcame a very poor consumer sentiment number this morning. I think that is not as irrelevant as the market treated it today and will be felt again as further economic news rolls out.
Technically, this action looks quite familiar. It is our old friend the low volume, V-shaped bounce. These moves confound the underinvested bulls and destroy the aggressive bears who think the market is going to start acting in a manner that makes more sense to them.
