Another Dose of Volatility

In the absence of any more devastating financial news, stocks took the path of least resistance and put on healthy gains on Thursday.

Dow 12,361.32 +261.66; NASDAQ 2,258.11 +48.15; S&P 500 1,329.51 +31.09; NYSE Composite 8,717.56 +168.06

While the unemployment figures delivered this morning prior to the opening bell showed more people applying for benefits, investors chose to overlook that and point to the idea that the Fed is allowing the banks to put up shaky collateral for its Term Securities Lending Facility (TSFL) loans in the form of CMOs (Collateralized Mortgage Obligations).

In other words, the Fed is going to swap good liquid money for toxic, illiquid assets. Those mortgage loans are the same structured vehicles that started the entire mess. Now the Fed is willing to accept these bad investments as collateral.

With any luck, other central banks around the globe will not want to trade with the Fed or hold dollars, since the Fed is wiling to risk its own credit standing and confidence in exchange for bailing out the banks and investment houses which made the ill-advised investments in the first place.

Bernanke's desperate solutions are bound to make matters even worse, albeit further down the road.

As for equities investors, what buyers at these levels must not comprehend is that there is hard resistance at 12,450 on the Dow and the market is very close to attaining that point, meaning that in all likelihood today's gains will have been made in a vacuum and will soon be swept away by more waves of selling.

Advancing issues swamped decliners by a 4406-1895 margin. New lows beat new highs once again, 374-48.

Commodities were in the spotlight once again as recent gains continued to unravel. Oil traded below $100 before closing down just 70 cents at $101.84. The metals were under more severe pressure. Gold fell $25.30 to $920.00, while silver took its second significant tumble in as many days, losing $1.60 to $16.85.

So-called "hot" money is being diverted from the metals into stocks. Fools rush in where angels dare to tread, and there are more than this market's fair share of fools out there.

NYSE Volume 6,158,374,000
NASDAQ Volume 2,652,208,500