So last night, I had every intention of writing my thoughts about the current market before I read the tax editorial in The Wall Street Journal.  By the time I was finished with that post, however, I had had enough on the computer.

Okay, so here's what I had planned to say yesterday.  Honest!

I was wondering whether we were seeing a near-term bottom in the market, and that the next move would be up.  My reasons were/are as follows;

• The market has a natural ebb and flow.  This decade, there have been four occasions - excluding this one - when the market rose at the beginning of the quarter only for it to sell off sharply before rallying into the end of March.  Conversely, when the market has opened down at the beginning of the year, the market has rallied mid-quarter before selling off at the end of March.  This year, the market rose at the beginning, then, as according to script, sold off.  The four times this occurred, sell-offs from the top ranged from -6.5% to -21.8%.  This year, the S&P 500 topped at 1461.51 on February 21.  It bottomed on March 14 at 1363.98, a 6.7% decline.  Also, the average bottom for the previous four declines occurred on March 17.  Not statistically significant, of course, but an interesting guideline nonetheless.
• Global asset markets are more correlated now than at any time in history.  The Shanghai index is pushing new highs, even after selling off on February 27.  Would the US market continue to fall as the Bubble-like Shanghai index was rising?  Probably not.
• Also, the charts of gold and silver look very interesting.  It looks like they made a near-term bottom a few days prior and are beginning to rise again.  Now, the uber-bears argue that gold and silver will rise as stocks crash.  That is possible but I believe unlikely.  Throughout this cyclical bull market, stocks have risen along with precious metals due, in part, to the same very powerful factor - the excess creation of liquidity.  If gold and silver are rising, stocks will also rise.  At least until they don't.
• That mind-numbingly boring, formerly-fun, widows-and-orphans group, semiconductor capital equipment, looks like its going higher.  If the chip equipment group is rising, the market is probably also going to rise.
• The near-term chart of the market looks like it is was forming one of those saucer-thingy bottoming patterns.

As for today, I think the market is being overly optimistic on the statement, an issue that I will address in my next post.  Having said that, it doesn't matter what I think, at least not in the near-term.  It is what the market thinks.  And the market thinks the next move by the Fed is down.  I'm not so sure but what matters near-term is perception.

Volume was only 10% higher than it was yesterday, with volume on the Big Board at 1.5 billion (last I checked).  The caveat, however, is that around 800 million shares were traded after 2:15pm, the heaviest volume in the final 105 minutes of the trading day since at least the break on February 27.  To provide some context, on two recent heavy volume days, March 13 and March 16, volume after 2:15 was roughly 700 million and 500 million shares respectively. 

You had an inkling that the market was sniffing out the announcement. Stocks began rising just after noon, so it wasn't surprising that market was going to interpret the news to the upside. Interestingly, however, though volume rose methodically into the close, all the gain occurred between the Fed announcement and 3:00. 

What really matters is tomorrow's action.  If there is follow-through on heavy volume, then I would expect the market to take out its highs.  Now, I am bearish, and I do expect the market to be substantially lower sometime between now and the end of next year, but I am not dogmatic (at least in the near-term).  If one is about to be swamped by the oceans of liquidity, its best to get into a lifeboat and avoid drowning. But if the market does not move up on heavy volume, then I think you continue to sell/short the rallies.