By Greg Peel

The Dow closed up 143 points or 1.3% while the S&P gained 1.3% to 1177 and the Nasdaq added 0.9%.

It would be easy to suggest Wall Street was up again last night because tomorrow tonight Ben Bernanke will announce QE3 and God will be in His heaven and all will be right with the world. The only problem is that the smarter analysts and investors around town seem now to have managed to convince Wall Street there will be no QE3 announcement tomorrow tonight. At least not in the form of expanding the Fed balance sheet by buying more US Treasuries with printed money. (See today: QE3 Disappointment Ahead).

If there's not going to be anymore money printing, well then there shouldn't be any runaway inflation. And if a step as drastic as QE3 is not announced then that would imply the Fed sees no need, ergo the Fed does not see the US economy double-dipping. We can speculate all we like, or wait to switch on the tele at midnight on Friday night to watch Ben live and hear what he has to say, but last night in the US the safe haveners really lost their bottle.

Having fallen US$68 on Tuesday night, last night gold fell another US$78.80/oz to US$1751.30/oz. Having fallen 3% on Wednesday it fell 4.3% last night. (Comex gold futures were actually down about US$110 at one point). Traders are now talking a potential black hole all the way down to under US$1600/oz. The bubble appears to have burst as the Johnny-come-latelies who got in above US$1800/oz have been getting out again ? fast.

I noted last week in my Reports that the stock market is unlikely to be able to rally meaningfully if investors are still piling into gold and US bonds because it implies there is still too much fear about. Well, gold may well have turned, and last night the US ten-year bond yield jumped 14 basis points to 2.30% despite solid demand for the Treasury's five-year auction (another record low settlement yield).

The earlier safe haven of the Swiss franc is no longer an indicator as it is no longer a truly floating currency but the "fear index" on Wall Street, or VIX, has dropped sharply over the past two sessions from out of the giddy, "panic" 40s to a simply "nervous" 35 last night.

The only piece of the puzzle really missing here is one of why have stocks rallied if there is no real expectation of more substantial stimulus from the Fed? Maybe a clue lies in last night's US economic data.

New durable goods orders in July rose 4.0% when economists had expected 2.0%. That 2.0% included new orders for lumpy things such as aircraft so take out transport, and economists had expected a fall in new orders. But they rose 0.7%.

Recent housing start and sales data have been pretty weak but last night it was revealed the FHFA house price index (houses under Fannie/Freddie mortgages) rose for the third month in a row in June. The 0.9% gain was the steepest since 2005. Prices are still down 5.9% year-on-year and that's the worst number since 2009, but the short-term trend appears to be reversing.

A couple of swallows do not make a summer of course but Ben Bernanke will be looking at improving recent data and rising inflation numbers before making his speech on Friday about the state of the US economy. In the meantime Wall Street has been sold down far enough for many investors to scream "value!" and if rumours of a double-dip are exaggerated, then perhaps that value call has merit. Earnings forecasts for the September and subsequent quarters still need to be revised down but stock indices have already made those revisions, perhaps too aggressively.

It all sounds rather rosy all of a sudden but of course we are forgetting one thing. We haven't heard a peep out of Europe this week, providing traders with small attention spans with a reason to forget that problems remain across the pond. ECB president Jean-Claude Trichet is due, by coincidence, to make a speech immediately after Bernanke's on Friday and Trichet has a remarkable gift for making extraordinarily stupid comments.

As Jackson Hole approaches it's all getting a little confused, although one might suggest all we're really seeing this week is some posturing for position and squaring up ahead of whatever may transpire. This would include shorts getting out of the stock market and skittish longs out of gold and US bonds.

Base metal traders in London are unsure, meaning metals closed mixed last night on smallish moves. Silver has its precious hat on as gold tumbles so it fell another 5% last night. Oil markets are equally unsure, with Brent rising US84c to US$110.15/bbl and West Texas falling US19c to US$85.25/bbl.

The US dollar index rose 0.3% to 74.04 but the Aussie risk indicator has squared up somewhat, falling half a cent to US$1.0474.

The SPI Overnight was up 43 points or 1.0%.

It's fair to say that Wall Street has ceased being a daily lead indicator for the Australian market lately, and if anything Wall Street has followed us as the Yanks pile in and out of our market before getting a chance to attack their own. We also have our local issues to deal with, in the form of RBA policy speculation and the current corporate results season.

There are too many reports out today to even bother picking highlights. Please refer to the FNArena Calendar.

We hear fans are already gathering outside the BRR studios for today's broadcast of FNArena's Market Insight, in which Rudi and I solve the world's financial problems with a half hour chat. Market Insight will from today be broadcast at the new time of 4.30pm rather than 4.00pm so brokers busy with end of day books-close don't miss out. And by popular request, an accompanying audio recording will be made available for those with slow connections alongside the regular vodcast recording shortly after the live broadcast.

Ahead of market Insight, Rudi will make a regular appearance on Sky Business at noon.