For two days in a row, the DOW has managed to shrug off very negative futures and starts and go vertical without any fundamental support. In fact, corporate earnings today from Morgan Stanley, Boeing, and AT&T, much like yesterday's corporate earnings, were much worse than expected and would not result in "sane" investors buying the DOW.

Furthermore, the chief of Freddie Mac, a major GSE, was found dead of an "apparent" suicide earlier this morning. Would this event foster additional confidence in buying the DOW? As one economist wisely noted today..."I’m sorry, but CFO’s who are doing the right things, working in institutions that are financially healthy DO NOT KILL THEMSELVES! WHAT IS GOING ON IN FRE?"

Rick Ackerman below provides a decent explanation of the rather unusual but recent relationship between the DOW and gold.

Over the past two days, we have witnessed the PPT at its finest. But with the cards beginning to fall faster and faster, the big question is whether or not they can continue to offset the accelerating carnage?

We may find out soon - VHF

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Gold Shrugs Off Fools’ Body Blows

Rick Ackerman

April 22, 2009

With the stock market giddy as ever yesterday, gold held up surprisingly well. The June Comex contract was off just slightly even though Dow Industrials tacked on 128 points. Ordinarily, with the broad averages in a moderate short-squeeze, we would have expected bullion futures to give up more of the gains they’d achieved on Friday. In a bigger picture gold looks even more impressive, since it has fallen by only six percent while the Dow has risen 24 percent since the bear rally began on March 6.

The inverse correlation between gold and the stock market has become so pronounced lately that a nimble trader could practically arbitrage one against the other tick-for-tick. Why should gold and stocks be moving in opposite directions these days? The reason is simple: Gold has at last come to reflect anxiety about the true state of the global economy, and there are times like now when that anxiety momentarily abates. Gold bugs can only sit patiently on the sidelines, amusing themselves with the high and low comedy that will always accompany bull traps like this one. For instance, there is the amusing story of how Citi’s trading desk made a whopping $4.69 billion in the last quarter, even though the bank lost money in every other area of its operations. Basically, the bank bet heavily against itself and won. Our friend Dan Denning at The Daily Reckoning lays out this fascinating tale in all of its louche details, so if you want the full story, click here.

June Comex Scorns Target

Getting back to gold, we are impressed with the way it has absorbed the body blows of stock market rallies such as yesterday’s. We should also note that the June Comex contract has stubbornly refused to pull back to an 845.20 target that has been our minimum downside projection since mid-March. We still think that number will be hit before gold can base for another serious shot at $1000, but the already bullish outlook for the intermediate- and long-term would brighten further on a thrust that surpasses 911.80. That would turn the hourly chart bullish -- the moreso if it were to occur with the backdrop of a hellish decline in the broad averages. There is so much silly thinking and egregiously misplaced optimism in this bear rally that the next leg down is likely to be a real humdinger.