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The markets that refused to panic on instructions from pundits and politicians last week refused to rally as instructed today.

It’s almost as if the markets were trying to prove that no one knows what they’re talking about.

If so, it’s a lesson many of us are still refusing to learn. There seems to be a lot of confidence the passage of the debt ceiling hike will build confidence and be a bullish event for markets.

What if that’s as wrong as the panic-rally predictions of the last seven days? What if raising the debt ceiling causes a sell-off?

One email correspondent, who I’ll keep anonymous since I haven’t asked for his permission to identify him, writes that this is exactly happened when the Treasury Department's TARP passed.

In 2008, many market watchers were certain that without TARP the markets would crash. Now the conventional wisdom is that a failure to have a deal on the debt ceiling will cause the same result.

There are two key ironies that I learned from reviewing the charts and overlaying them with the congressional action:

1. The stock market actually crashed AFTER the TARP Bill was later signed into law.

2. The stock market was actually ‘FLAT’ between two TARP votes.

I’ve been hearing a lot about how “The stock market crash from the first failed TARP vote immediately caused House members to act and pass TARP on a second emergency vote.”

While the stock market fell on September 29 (first TARP vote), the actual crash ironically materialized AFTER President Bush signed the TARP bail-out package into law — beginning the turmoil on Monday, October 6.

Instead, the stock market was relatively flat between the first failed TARP vote on Monday, September 29 and the second successful vote on Friday, October 3.

One might logically assume the crash happened after the first failed TARP vote and then the market stabilized after the second successful TARP vote but that was not the case.

So will this be another sell on the news event?

I wouldn't make that prediction. But that wouldn’t be entirely irrational. Imagine if you owned some corporate bonds and discovered the company's secured creditors were allowing it to incur far more debt than you ever imagined. Maybe it had defaulted on its original covenants and then purchased a debt waiver allowing it to blow out the covenants.

You’d be relieved the company hadn’t defaulted. But the news that it could now lever up even further would be unwelcome.

So it’s possible that we’ve all read this in exactly the wrong way.

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