In spite of yesterday afternoon's earnings bomb from AAPL, SNDK, AXP, and others, the market ended up way in the green today. I was saved only by my energy puts, as gold/oil fell in conjunction with the dollar's newfound strength.

Because of the strength in banks, the $RUT has been especially strong, pushing up an amazing 2.75% today. In fact, much of the Russell's drop over the prior weeks has been all recovered in merely five trading sessions! Bear market rallies have a well-deserved reputation for being fast and merciless.

Looking at the intraday graph, the Russell has retraced to its neckline. This is a very well-formed head and shoulders pattern. If it keeps pushing higher from here, we could be in some trouble.

I refuse to go through another mid-March to mid-May exercise, where I blow all my hard-earned profits fighting a huge rally. So I am being very defensive here. But the above are the most meaningful patterns I am watching. Good luck to you and me both, dear reader!

This is a slice of awesome.

I'm having a very good morning so far, but no thanks at all to my index puts. Even though my $RUT and $SPX puts did wonderfully at the start of the day (thanks to a ton of bombshell earnings yesterday), the new market theme indeed seems to be Earnings Could Be Even Worse, So Buy! So if you're a bank that lost $10 billion, but you might have lost $12 billion, investors are gobbling you up.

I've been "weeding" my charts for any underperformers or those that seem to have fulfilled their destiny. I am pretty floored by the strength in indexes, particularly $RUT, but I guess the bounceback still has some life in it.

I'm not really inclined to post a bunch of charts right now, because the after-hours trading has rendered them sort of irrelevant. AAPL is getting killed. AXP, SNDK, a bunch of banks. There's red all over the place. And I'm an idiot for selling my GOOG puts last Friday. I made a great profit, but what's 70% when you can have 100%? Or more?

Anyway…..over the weekend, I concluded (based on my own opinion and the opinions of others whom I respect) that our little bear market rally was just about over. I figured it would have enough juice to push it into Monday (which it sort of did; the market was mixed – the Dow, down, the Russell, up). But that after this "short selling is illegal!" rally had petered out, it would be party time again.

And I think the party time has arrived right on cue. Today I was gobbling up puts on financial institutions that I haven't touched for weeks (or months) or have never traded in my life. I never would have considered stuff like Bank of America or USB, but (a) the serious trouble that banks are in; along with (b) the rapid retracement they have "enjoyed' recently; made a terrific one-two punch. I wanted to be short those instruments. So now I am.

I think what's going on in the U.S. financial  markets is pathetic right now, and not worthy of a civilized nation. Trying to curb market forces based on the whimpering mews of battered bulls might play out in Pakistan, but it shouldn't be part of our culture. But it is. Because a bull cannot stand a fair fight. So we have stooped to the standards of the third world, merely because Paulson and Bernanke are so deeply in bed with their Wall Street buddies that they'd rather sell our market-based system out rather than have their friends be mad at them. Charlatans.

As unfortunate as the game-rigging is, I think it only affirms that the bear market is here, and it's going to be huge. Why else would they be so frightened? Just read the platitudes of politicians from 1930-1932, and you'll understand the environment we're in. They want you to think everything is going to be just fine. But it isn't. Charts don't lie. Politicians make a living out of lying. Trust the chart. Not chrome-dome.

I imagine the crooks will turn the tide in the next month or two, and a naive hope will settle in over the land that President Obama will make things right. We will have a very substantial rally (not a 4 day affair, but lasting many months). And all will be well. And the $VIX will be 12 again. And, before anyone realizes it, a much bigger bear market is going to take hold. But we're going to have to wait until the second half of 2009 for that party.

I'll probably do a post in the morning if I have time. Until then, godspeed to you.