We now know the proximate cause of this week’s stock market rally. The Fed closed on the purchase of $167 billion of MBS in the week ended Wednesday. This is by far a record infusion of permanent cash into the financial system. For those of who were short the market, it would have been nice if the Fed had told us in advance that this week would be D-Day. We knew the purchase contracts were out there, but we did not know when they would settle. I had guessed that it would be next week, concurrent with a big bulge in Treasury supply. My guess was a week late. Instead, the Fed made a pre-emptive strike. Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. Click here for more information.