This means stocks are supposed to rise as the Fed injects more Funny Money into the financial system. POMO is permanent open market operations where the Fed buys treasuries from the bankers and then the fresh cash is deployed into the stock market. This POMO script is on going and will continue. It will help to at least keep a floor under the stock market, if not lift it higher in the short term. If you are net short the market, you may as well be banging your head against a brick wall. Yes, shorts, your day will come, but it is hard to know exactly when that date is. Certainly if you're bullish and understand the old adages of the "Fed is your friend" or "Don't fight the Fed" you've had a gleeful experience since S&P 666, though it is prudent to hedge in some way via, for example, some cheap SPY puts. The upshot of all this? I am still sticking to a doomish outlook on the banking sector that will eventually hurt the rest of the market. There's no doubt that POMO has worked, but the day will come when it won't be enough. The market is already overly dependent on POMO and will need and demand more and more of it to the point that it becomes too difficult for even the crazy Fed to accommodate. Either that, or 'events' outside the Fed's control will overwhelm the POMO game. Pick your eventual poison. Post election day will be very interesting. Good trading to everyone.
EDIT FRI NIGHT: At best POMO could be considered neutral following the noticeable market reversal on Thursday. The banking mortgage debacle weighed on the market and so to did G20.