I am not the only market-watcher who has noticed that although the news seems to get progressively worse for the banks and brokers, and stress to the financial system and the Fed (lender of last resort) gets progressively more intense, the stock indices for the most part have held above their January lows. The Jan. 22 low in the Dow at 11,635, for instance, was tested Monday at 11,732, and perhaps we should consider Friday's low at 11,833 as yet another test -- amidst treacherous news and innuendo about the efficacy of Bear Stearns. And what about the transportation average (DJTA), which did not come within 8% of its Jan. 22 low on any pullback (yet) despite $110/bbl oil and a barrage of expectations that a deep recession is in progress?

Do we give the market kudos for such relative strength? Are the equity indices looking "out there" and seeing something much more positive than the current news and "forward thinkers" see?

I have one theory, having spent eight years proprietary trading foreign exchange for a major NYC bank: that the powers that be realize the dollar has to stabilize or be stabilized and that the carte blanche one-way "freebie" dollar short has got to come to an end -- to ensure that the global financial markets do not implode. If the G-7 or the G-10 coordinated a powerful intervention to sell euro and yen, to buy dollars, then my sense is that a massive one-way trade would rip towards the exits, the dollar could soar 5%-8%, gold and commodities would take a bath, oil would plunge, the flight-to-quality in bonds would be reversed, and money likely would flow into equities in a hurry.

Of course, intervention is no panacea, and the longer the trend, the more bouts of intervention usually are necessary to turn the currency in question (the dollar). In the past 30 years, periods of intervention by the central banks dissuaded the speculators, and ended up putting in major turns.

The stakes are higher now than at any time in my career. If the Fed is intervening in the credit markets to stabilize the money markets, my sense is that foreign exchange intervention has to be on the table as one of its next moves -- to show the interventional investment and banking community that the authorities will spare no effort to restore faith in the markets, and in themselves.

With all of the above in mind, let me reassure you that forex intervention remains only a guess on my part, and I don't base any of my analysis or strategy on the "hope" of intervention. My work is my work... and that is what I use in practice. My theories stay theories, until proven otherwise.