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Right now, it’s do or die for the bulls

The Bank of Japan just shocked the markets early Thursday morning. Investors around the world were hoping for more stimulus. Instead, they got the worst news possible: “helicopter money” is illegal in Japan—meaning the BOJ won’t be directly funding the Japanese government.

Without a statutory basis for providing the additional conjured liquidity that investors so badly wanted, the Yen (USDJPY=X) sold off an eye-watering 3% versus the U.S. dollar—in minutes. That might not seem like much, but the big guys trading currencies are typically leveraged 10 to 100 times. So the directional move is more like 30% to 300%. Those losses spilled over into every market in the world.

As if that weren’t bad enough, U.S. GDP just printed a disappointing 0.5%—the worst in two years. I’ll beat this drum one more time: The Fed is supposed to raise rates into a booming economy with GDP pushing above 3%. Bernanke should have raised rates years ago. And now Yellen is paying the price for both of their intransigence.

What’s a central banker to do?

Draghi could buy more European corporate bonds, Kuroda in Japan could make rates more negative, and Yellen could signal there will be no rate increase this year. Is this really what monetary policy has come to?

There are simply no palatable options on the table now. Yet, U.S. stocks continue to defy gravity against the aforementioned backdrop along with a disappointing earnings season that began with already-low expectations (okay, Facebook (FB) gets a pass).

The good news for the bulls is that they’re still in the game. I said a week ago that what they needed to do was discount bad news and rally on good news. That time has come and today they were doing their job until the afternoon. Once again, things have turned ugly.

Here are the levels to watch

A decisive break of 2075 in the S&P 500 (^GSPC) will get the short sellers courageous again, so the bulls need to break above 2111 and set their sites on those all-time highs hovering at 2135.

If this were easy, they’d send children to do it. Trillions are at stake. Make your move, bulls.