The bottom callers announced that the Fed bailout of Bear Stearns marked the end of low stock prices. Supposedly, this unprecedented and illegal (in my opinion) action provided a backstop of epic proportions. As a free market capitalist, this whole episode and especially, the happy and comforted reaction of many market participants has greatly damaged my opinion of this country and capitalism. Nonetheless, it was done. I detest it, but I deal with it.

Here’s the problem….if the only thing that stopped the last market decline was the Fed’s bailout, then what do we do now? After all, the bulls have been mooing for quite a while that the bottom was set and the worst of the credit crisis was behind us. UH OH!! I guess that means that the next decline is not going to be worthy of a Fed bailout.  We are on our own this time. Logic right? If there is no new credit crisis on the horizon, then the Fed will not be needed to save us again. As for the economy, the bulls were saying that all was not bad - at least they were saying that last week when stocks were heading higher.   So as for renewed rate cut calls, they can try that but it will be pretty pathetic when compared to last week’s optimism.

It’s premature to suggest that the last two days marked a return to continued and meaningful downward pressure, but the bulls better hope so. If we approach prior lows, you can bet that there will be serious attempts at programmed trades to defend 1320 to try and create an inverted head and shoulders pattern and if that doesn’t work, to defend the March 17 support levels.  However, the next bottom will be a real test of the bulls beliefs.  And this time, it will be without the help of the Fed.  Unless of course, there does happen to be a credit crisis moment that has been hiding in the background (maybe in Europe?) that will magically be revealed so the Central Bankers can be justified in their reappearance.

I hope the next bottom is earned by market participants.