Today is Hangover Thursday for Mr. Market's disciples.
The shorts, aka the bears, were beaten into submission on Wednesday despite their cause finding support in lower economic growth projections from the Federal Reserve that may be as credible as a baby unicorn sighting.
The longs, who remembered markets always go higher with quantitative easing insemination trials occurring, were rewarded, and will likely buy more into the weekend. Through all of the hoopla one burning question exists, however: what now?
Finding the answer to that question I suspect will take a couple sessions as euphoria on a waning recovery (crazy logic, right?) that triggers electronic debits into digital bank vaults reigns supreme.
But, the Fed served the masses two reminders and one thing to pay attention to going forward:
1. Markets are the head of household
The rulebook says that Fed policy is dictated by an unfortunate dual mandate. Yet, the Fed continues to live by Street rules, a rough and tumble tactical guide that is made up on the fly as markets are a daily real-time pricing mechanism.
Yes folks, markets, bond and stock, continue to dictate Fed policy rather than this dual mandate nonsense of maximum employment and price stability.
Let's quickly examine recent examples.
(Related video: What's holding back the Fed?)
1. Bernanke drops a summer comment bomb that uproots the equity markets rally as rates become unmoored. Then, finding the errors in his communication, Fed governors are mobilized to suppress Bernanke's verbal misfires and talk down rates.
2. Bernanke basically heaves the herculean task of beginning a taper onto the shoulders of the next individual. Although showing confidence in the skillset of potential successors Janet Yellen and Donald Kohn, he acknowledges the market's power over Open Markets Committee decision-making. How could Bernanke incrementally remove accommodation following five U.S. data disappointments since August, as well as considering this simple throwback chart?