Early Friday morning we all learned that there is a “Bernanke put,” although it is not as strong as, and it’s given more grudgingly than, the “Greenspan put.” In both cases the “put” is that if big financial institutions get in trouble, the Fed will bail them out. So, if you are a little guy who borrowed money on a sub-prime mortgage as your one shot to achieve the dream of home ownership, and now your monthly payment is resetting to the sky with zero chance of refinancing or selling at your cost, it is time to pack your stuff and get out — you lost.

On the other hand, if you are a big hedge fund, with good Wall Street connections, that overleveraged in sub-prime mortgages and need a few billion dollars to stay in business and collect your fees — Bernanke will bail you out. You are “too big to fail” as that would introduce “systemic risk” to the financial system.

It really is galling the way that Wall Street portrays itself as the last bastion of cutthroat capitalism, where the free market rewards the strong and crushes the weak. But, of course, once they get themselves into a hole, due to their own cupidity, out comes the beggar’s bowl asking for a bailout. And, as seen on Friday, they always get it.

The Bernanke put was cleverly done. Instead of cutting the Fed funds rate, which might lower rates for all the strapped individuals in adjustable rate mortgages, Bernanke cut the discount rate that banks pay to borrow from the Fed by a half a percentage point, or 50 basis points. Normally, this rate is a full percentage point higher than the Fed funds rate, so Big Ben just whacked the increment in half. Pretty smart. With Bank of America saying that they will no longer lend on real estate in Florida, the Fed can now call them up behind the scenes and tell them that they are expected to take down enough money at the lower discount rate to convince Bank of America to change their minds.

The reaction in the stock market on Friday to the Bernanke put was virtually instantaneous. The S&P futures shot up 50 points in less than two minutes. The message to anyone on the sidelines or, heaven forbid, actually short stocks, was mighty clear: Run! And run they did. If the Fed had done nothing, those 50 points probably would have been to the downside, hitting the 1326 weekly breakout point that I talked about in last Thursday’s Radar Report. On the other hand, if Friday wasn’t an options expiration day we might have seen an even bigger move up. As it was, the 1440 level that I’ve talked about so much acted once again like a magnet.

I’ve seen some talk that the VIX volatility index has to hit 40 before we can say that the downturn is over and a new upleg has begun. That is nonsense. The VIX hit 37.50 Friday and closed at 29.99. Those are high numbers, even for a bear market, and they should help provide enough energy to run the S&P up hundreds of points, if everything else lines up. I expect the S&P will now march up to the 1530 breakdown point, and what happens from there will depend on a lot of factors, including what the Fed does at their next meeting on September 18, any hurricanes that impact oil prices and, most important, how the internals of the S&P look when we get to 1530. I’m not saying that it is impossible to see the VIX go to 40 and the S&P crack back down, but that is not the most likely path and certainly not worth basing your actions on in advance.

As always, we should let the market tell us what it wants to do. Right now, it is saying: “I want to go up.” Don’t be surprised to see little dips back down like this morning, testing various minor support levels from the move up. Even a quick, scary decline back to 1404 would not indicate that the Bernanke put rally is off course. One of the keys that I will be watching is the VIX. If it comes down slowly, or even holds steady in this area, the rally could extend quite far. If it comes down rapidly, indicating that the hot money is getting complacent again, 1530 may be as good as it gets.

Either way, right now you should be fully invested. If you’re looking for a good place to put some money to work, I recommend that you start with my Top Buys list, the New Energy Technology MegaShift, the Biotech MegaShift and the Content on Demand MegaShift. My newest recommendations — Akamai Technologies (AKAM) and CombinatoRx (CRXX) are especially good buys right now.