A day like yesterday (07/18/07) deserves memorializing because it was the Market Mistress at the top of her game. She returned with one of her favorite methods of making us all do the wrong thing — it was the old Morse is Back Trick (read Stories, by Victor Niederhoffer), but this time with Bear Stearns stock down 5% and the market down 1%, and then both ending the day nearly unchanged. It was a typical day when she wished to unleash weak longs from their positions — a selling climax, with the bears hoping for an afternoon collapse.

First it was a couple of bad earnings reports used to shake out the weak hands, then it was the return of subprime woes to the speculators' thoughts — news that is already discounted — then it was the thought that last time Bernanke testified it went down, so let's take it down this time too. It was also bearish sentiment on Intel, reporting earnings up only 50% and projecting a 3% increase in profit margins next time — somehow seen as a cause to take it down, "they're losing business to AMD."

It was also that the Dow tested the 14000 round number but couldn't hold it, and the same happened to the DAX at 8000. The sad part was that with all that was going on, the 10 year bond yield fell below 5%, and this was enough to keep some players in the game, like gold in the late 70s or grain when there is a crop shortage — poised for the inevitable reversal.


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