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Two Ways: Did Bernanke Light a Fire Under the Market's Bottom?

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Strengthen your portfolio in good times and bad.

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Equity markets had their biggest rally this year after Federal Reserve Chairman Ben Bernanke outlined steps to fix the banking industry in a morning address. His remarks, delivered to the Council on Foreign Relations Committee, called for an overhaul of the entire financial industry "in a holistic way, not just its individual components."

"In the near term, governments around the world must continue to take forceful and, when appropriate, coordinated action to restore financial market functioning and the flow of credit," Bernanke said. "Coordinated" seemed to be the operative word, as minutes later rumors centering on the renewal of the uptick rule by the Securities and Exchange Commission began to swirl.

The so-called uptick rule, which would appear to have the backing of House Financial Services Committee Chairman Barney Frank and Senate Banking Comittee Chairman Christopher Dodd, prevents traders from betting against a stock until it sells at a higher price than the previous tick.

The S&P 500 had its biggest 1-day rally for 2009, adding 6.37% to close at 719. The Dow Industrials closed higher by 380 points, or 5.8%, to 6926. The Nasdaq finished up 90 points, or 7.07%, to end the day at 1358.

For more on the economy, see Professor Kevin Depew's Five Things You Need To know.

From the Bull Pen: Follow through in the next few days will be key. Bulls have been faked out before and we still have a few binary events coming up (i.e. the March 12 hearing on mark-to-market accounting). Consider the iShares Russell 2000 ETF (IWM), but set your sell stops to the appropriate risk level.

From the Bear Cave: If the S&P 500 gives up today's gains, watch out, because the markets are likely headed much lower. Watch the behavior in the next few days and keep in mind yesterday's close of 676.

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No positions in stocks mentioned.

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