The Dow Jones (which now includes BSC)

As you can see above, the dow jones industrial average has been in a huge 1000 point range since the start of this year. The range goes from 11,750 to about 12,750 which happens to be where the dow "bottomed" in August and November 2007. I don't see many reasons why the bulls won't rally this market up to at least the upper end of that range with the aid of the media. If you watched the headlines last week or cnbc, you would get the feeling that the financial crisis is over after the fed sacrificed Bear Stearns to save the rest of us. There is a fair amount of idiotic bullish momo going around and if they want to give us better prices to short from then why not let them. Some indicators are looking bullish now too, like the CCI and stochastics which gave buy signals last week. Furthermore, volume on up days has been increasing and is well above average.

Another point worth noting is that for the last six months or so the declining 50 day moving average has acted like resistance. In fact, shorting at the 50 dma has been ideal and the dow just rallied back up to it last week but I wouldn't short it here. The dow broke the 50 dma on the fed cut rally Tuesday, pulled back on lower volume Wednesday and broke it again on Friday with huge volume. This is not the type of behavior I'd like to see when the dow reaches resistance. In addition, the 50 dma is beginning to slope upwards. Long story short (no pun intended), I bet the dow rallies up to 12,750 ish, stalls then has a "super bullish" breakout to suck all the idiot money in. I can see it now, we breakout of this range, and the media screams bull market touting net gains for the year. We get back up to that 13,000 area and we tank big time on the accelerating contraction of the US economy and soaring commodity prices. If the dow reaches the declining 200 dma thats where you really want to short like crazy, but that would be asking too much I think. My guess.

You are probably wondering why I seem so bullish all of a sudden. I think it has something to do with the government intervening in /manipulating the market on scales I would have never dreamed possible. They are hell bent on saving wallstreet, and while I know this will end badly, theres a good chance it works in the short term. I was thinking about the BSC fraud last week and I realized a possible hidden agenda for the move. I originally thought the fed insisted on the $2 price so they could say "we aren't bailing out risk takers, look at the poor BSC shareholders." I'm sure theres some truth to that, and Hank Paulson said the line a few times last week. But what about this, JP Morgan is one of the 30 stocks in the dow, Bear was not. Bear Stearns was a huge company, a blue chip with a book value of something like $84 per share ($11B) but it was not in the dow average. The fed essentially took all that value, divided it by 40 and injected it into the dow jones. In a sense, the fed organized a $10B capital infusion into the most watched market index on the planet. Recall that many stocks just track the performance of the dow jones. Call me crazy, but it seems like that was a huge prop job and frankly it worked, just take a look at JP Morgan last week:

Call me a conspiracy theorist if you want but it seems pretty clear to me that the government will stop at nothing to prop this market up and boost the pocket books Paulson's buddies on the street. These relentless rate cuts and fed interventions are going to have the intended effect in the short term and I'm not going to fight it. Instead I think I'll just sit back and watch the monkey's do their dance until its obvious they are up the creek without a paddle.