By Greg Peel

The Dow closed up 155 points or 1.2% while the S&P gained 1.1% to 1329 and the Nasdaq added 0.6%.

It's a mad, mad world. Anyone watching Wall Street live this morning would have noted a Dow up around 80 points as we entered the last hour of trade, looked down to stir their coffee, and looked back to see the Dow up nearly 200 points. There followed a last hour rollercoaster, culminating in a net 155 point rise. What on earth was going on?

What happened was that Wall Street "fell into an upside hole", as we used to say. These usually occur when buy-at-market orders are being placed just as existing sell orders are rapidly pulled, suddenly implying there is no "market" at all. Once upon a time, when humans made the ultimate trading decisions, such "upside holes" would be limited by simple common sense. Computers, unfortunately, do not exhibit quite as much common sense as your average human.

To understand what caused this hole, we have to go back to the beginning of last night's session. Traders had two pieces of information to absorb ? the first relating to US economic data and the second to expectations for the Greek election result.

The first data release was the typically very volatile measure of weekly new jobless claims, which showed an increase of 6,000 to 386,000 when economists had expected a fall to 376,000. It's the fifth weekly increase in six. The other data release was the May CPI, which fell 0.3% on the headline when a 0.2% fall was expected. This might imply a slowing economy, except that the core measure used by the Fed (ex food & energy) rose by 0.2% as expected.

Either way, low inflation means no barrier to further monetary stimulus from the Fed. And given Wall Street is yet again in "upside-down" mode, the bad news of the jobs numbers is thus good news given it provides a stronger argument for QE3.

The other piece of information relates to Greece, where unofficial pre-election polling is suggesting a swing towards the pro bail-out side and away from the anti bail-out side. In other words this implies a swing towards wanting to stay in the eurozone and that is seen as a positive by the markets. It's not quite so cut and dried, however. The hard left still believes it can stay in the eurozone and yet abandon forced austerity measures. This is a popular panacea for the great unwashed. More sensible pro bail-out parties are pointing to the ECB bail-out funds specifically for Spanish banks, offered last week, as evidence of why a renegotiation of the Greek bail-out terms can at least be achieved.

The troika has said time and time again: "No renegotiation".

Whatever the case, all of the above was enough to see the Dow shoot up from the open and hover around the up-80 mark for most of the session. Until the clocked ticked over for the last hour.

It was then a report hit the wires suggesting global central banks were readying themselves for a coordinated intervention were the Greek election result to spark major panic. That's when Wall Street fell into its upside hole. But there were two issues to consider with regards to the report.

Firstly, the source was quoted as "a senior G20 aide". Traders have often been caught out over these past volatile years by assuming vague rumours to be true. A "senior G20 aide" is about as good as "the butcher told my wife's sister", for one, and for two, the G20 does not control the central banks. So as quickly as stocks had shot up, they began to fall back again. And the second point could well be summed up as "Well, duh". Of course the central banks are ready to act if needed. It's all they've ever said and all they've ever done since Lehman.

Irrespective of that last point, further reports flowed in over the final hour of trade which indeed supported the initial rumour. The Bank of England said it was considering further stimulus. The Bank of Japan said it was ready to step in with further currency intervention. The Swiss National Bank told Swiss banks to get their houses in order. There was no word out of either the Fed or ECB, but the mantra of both (in the ECB's case, since Trichet thankfully departed) has always been "whatever it takes".

As I have been noting, the Fed begins a scheduled policy meeting on Tuesday night and will release a policy statement on Wednesday night. We may not, however, have to wait that long. If a negative Greek outcome is apparent beforehand (or even a stalemate for that matter), the central banks will gallop over the hill, bugles sounding.

And that's why Wall Street was up last night. In a nutshell, it's a good idea to buy stocks because global markets might just be about to fall apart. As I said, it's a mad, mad world.

Expectations for QE3, or at least some form of extended stimulus, had the US dollar index tumbling 0.5% to 81.81 last night, aided by sharp buying in the euro on the central bank story. And thus the Aussie, I'm sorry to say, is now back above parity at US$1.0024. Gold only managed a US$5.70 rise to US$1622.90/oz given it has been inching up all week.

Base metals had another one of their typically confused sessions, not going anywhere much but in different directions, while last night's oil trade was impacted by specific influences. OPEC was due to hold one of its regular production quota meetings last night but instead postponed on the basis of wanting to wait till after the Greek election. Production quotas are thus unchanged, but the weaker dollar allowed Brent to rise US$1.10 to US$97.82/bbl and West Texas US$1.78 to US$84.40/bbl.

There was not a lot going on in US bonds, with the ten-year ticking up only one bp to 1.61%, and would you believe, ahead of most potentially dramatic event since the fall of Lehman, the VIX fell 10% to 21.

The SPI Overnight rose 24 points or 0.6%.

It's Australia's last chance today to position ahead of the election. As to what that this implies for market movement is anyone's guess. The US has its chance tonight, and will also have to deal with releases on industrial production, manufacturing and consumer sentiment as well as the unfortunate timing of "quadruple witching" ? the expiry of stock and futures options ? which usually implies volatility anyway.

Pass the ouzo, I'm bunkering down.

Just as an aside, last night the Spanish ten-year bond yield crossed 7%, typically considered the point of no return and implicit of a necessary bail-out a la Greece, Ireland and Portugal. Yields jumped because Moody's downgraded Spain to one notch above junk, given rising bond yields are diminishing Spain's capacity to pay its debt. Yields have been rising because ratings agencies have been downgrading, due to rising yields. Like I said: mad.

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