Why the equity market isn't any lower?

Many may wonder why the market isn't any lower with the pessimism and large writedowns from about 1/4 of the entire S&P 500 being reported. ONE ANSWER, Liquity.

And its clear where its going, tech stocks. APPL, GOOG, MSFT and the second tier companies are all benefiting, with powerful momentum.

How is this possible? Well, lowering rates and opening the discount window - someone is borrowing. BUT WHO?

Minyanville.com summed it up like this:
"Banks are taking the liquidity the Fed is forcing out there through the
discount window and repos. After using it to shore up the declining value of
their assets, they have excess to lend out. Finding no traditional borrowers
that want to buy a house or build a factory, the new rules the Fed has set
forth allows the banks to pass this liquidity onto their broker dealer
subsidiaries in much greater quantities. These broker dealers are lending thus
to hedge funds and margin buyers who are speculating in stocks. Remember, the
Fed is powerless unless it can find people to borrow the credit it wants them
to spend."
Basically, the Fed modified its rules so that the banks could provide resources to their off-balance sheets
operations (SIVs and conduits). If the Fed is willing to rubber-stamp that type
of monkey-business; then why would they mind if the money was stealthily "back-doored"
into the stock market via the hedge funds?

This might explain why the hedge funds account for as much as 40 to 50 per cent
of all trading on an average day. It also explains why the stock market is
Bloomberg News:
"Banks shut out of the market for short-term loans are finding salvation in a
government lending program set up to revive housing during the Great
Depression. Countrywide Financial Corp., Washington Mutual Inc., Hudson City
Bancorp Inc. and hundreds of other lenders borrowed a record $163 billion from
the 12 Federal Home Loan Banks in August and September as interest rates on
asset-backed commercial paper rose as high as 5.6 percent. The
government-sponsored companies were able to make loans at about 4.9 percent,
saving the private banks about $1 billion in annual interest."
Well, the risks that are inherent in supporting "dodgy banks that make bad bets"
has been transferred to FHLB's investors. The danger, of course, is that-when
investors find out that FHLB is mixed up with these shaky banks, they are liable to selltheir shares and trigger a collapse of the system.
AAA and AA assets, the top-graded tranches, have already been downgraded by
20 per cent to 50 per cent! And the prices are bound to fall even more because
there is no market for mortgage-backed securities. This is a bank's worst
nightmare; an asset that loses value and requires greater capital reserves
every day. In fact, AAA rated MBSs have dropped 14 per cent in one month.

$882 billion has been diverted into Chinese and Indian stock markets
in the last month
alone. Sources cited from Patrick.net links...