Whew! What a week! Greece and other countries in Europe are strangling to death in their debt noose as a result of their cheating the EU limits on deficits. Bernanke decided to surprise the market with a slight increase in the fed discount rate in an attempt to cheat his way to normalizing the currency. Tiger Woods read a paper saying he was sorry he got caught cheating. And Joe Stack crashed his plane into an IRS building in Austin, TX because he was mad about government cheating. All this cheating makes the markets nervous.
Of course, the Fed has the printing press and the PPT at their command to goose the market indexes as needed. Their problem is the weakness in Europe with the Greek debt tragedy unfolding serving to weaken the Euro which in turn strengthens the US dollar. The chart below is the UUP etf which is the rising dollar. As we know, the stock market can be 'inflated' higher by intervention, stimulus, and manipulation. The stronger dollar depresses the Dow. What happened this past week was clearly the battle between the strong dollar versus the basket case of Europe. I included this weekly chart because the action from Friday is very curious. Notice the dollar strengthened early in the day, and was then deflated in an orderly manner as the day unfolded. Why? Bernanke raised the Fed discount rate after the close on Thursday. Knowing that this action could rattle the markets, I was confident that the PPT would be ready to go to work immediately to mitigate any psychological damage. I was right. The market recovered to the black. The dollar fell from its gap up at the opening. Greece will be bailed out as their derivative spawned debt is too big to fail. All is well. See. You can cure everything with a printing press!
2/19/10 - Past 5 trading days, 30-minute bars, UUP candlestick, DIA gold
Chart courtesy StockCharts.com