With the Nasdaq surging 1.5 percent and the Dow higher by 121 points, today one of the greats in the business sent King World News a fascinating piece about the fireworks that unfolded in key markets, plus a bonus Q&A that includes gold.

By Bill Fleckenstein President Of Fleckenstein Capital

May 27 (King World News) – Overnight bond markets were rather uneventful, except for a big rally in Greece on the latest gyrations emanating from that country. That scrap of good news was all equity markets needed to rally 1.5% to 2% in Europe, with the good cheer helping U.S. indices gain about 0.5% to 0.75% through midday, depending on which one you looked at, as yesterday's stumble was viewed as a buying opportunity by all the "dip" buyers.

King World News -- Bill Fleckenstein - Watching The Crazy Fireworks Unfold Today Was As Wild As Anything I Saw Back In 1999

Watching The Fireworks Today

The tape went wild in the afternoon, led by the Nasdaq, which was powered to a 1.5% gain by intense speculation in semiconductor land thanks to Avago Technologies. They are rumored to be in talks to buy Broadcom. Consequently, Avago's stock price popped 7%. That lunacy led all other semis to ramp up as if the entire industry was taking itself over. Watching those crazy fireworks unfold was as wild as anything I saw back in 1999, considering the underlying businesses.

Away from stocks, green paper was very strong early on, but it gave up a chunk its gains versus other colored paper as the Euro ended higher on the day. Fixed income was heavy, oil was a nonevent, and the metals were flat.

Believers In The Fed Fantasy

There is not much else to say about the overall action in the markets because the storyline remains the same. The Fed's policies don't work, but they do boost asset prices until they no longer can. At the moment folks aren't even remotely concerned that economic growth has been as lame as it has. Thus, problems are ignored as the believers in the Fed fantasy await the second-half rebound, despite the absence of a satisfactory explanation of why we need a rebound if Fed policies are so great. But obviously that small detail doesn't matter. 

Bonus Q&A

Included below are two questions and answers from today's Q&A with Bill Fleckenstein.  The questions are from his subscribers and they get to read these every day.

Question: Can a strong dollar force the Fed to raise rates? Or do I have it backwards?

Answer from Fleck: "You have it backwards."

Question: I am not the only reader who doesn't know your trigger point on buying more gold. I bought some futures in the high 1190s and sold just below 1224 figuring that this euro rally wouldn't hold.
Now that the Euro is trading below 108.80 to the dollar, I am looking at buying gold at a higher low around the high 1170s level, assuming that the trend will continue (gold having a higher low), risking 15 points (which is a lot) that gold holds.
My question is if the euro closes below 108.50 and then heads toward the 1.05 low, do you think gold holds that 1140-1135 level or gold makes a new low?
I personally don't believe gold is going to make a new low this year.

Answer from Fleck: "If the euro does what you describe it is hard to say. I would guess that level of gold would hold. I don't see why it need to break more given that the whole Fed fantasy story is fraying, but I am just guessing.***To subscribe to Bill Fleckenstein's fascinating Daily Thoughts CLICK HERE.

***ALSO JUST RELEASED: The Red Flag Has Now Been Raised! CLICK HERE.

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