QE3?

ES, S&P E-Mini futures, with the ZN, 10 Treasury future.  Normally bonds go up stocks go down, or stocks go up and bonds go down.  So bonds and stocks up together?  I guess everybody was on the QE3 train, but in the last couple of days Treasuries are off so?  I'm with this guy Yield Disconnect.

Operation Twist

Well nobody liked the Fed's move.  S&P lost 40 points and is dropping more overnight, Oil dropped 2 dollars.  Hopefully everybody waited to refinance their mortgages as the 10 year and with that mortgage rates just keep falling.

And across the pond. Greek Bonds were still up and so were Italian Bonds.  Not looking like anythings fixed over there.  Markets still pricing in Greek default of some type.

So all and all market looking like it going to keep going down.  Nasdaq hasn't been dropping like the Dow and S&P I'd expect that that change soon.  S&P August low of 1120 range is looking like a next stop.

Why the Fed matters.

See if you can pick where the Fed press conference was on this 5 day chart of the S&P?  Soon as we start going up volume drys up.

Before the Fed had to actually do QE and QE2 to make the market move, now they just hint at it and we get the same effect.  Here's the fun part no ones seems to talk about.  QE3 what's the cost?  See if you can spot where of this 5 day chart of the UUP, dollar index etf, the Fed conference was?  So are stocks really going up or is the dollar going down and since stocks are bought in dollars the price is just adjusting for a dollar that's value is declining.

Dollar goes down guess what goes up.  Everything else.  Here's the oil chart.

Fed Friday

It's all about Jackson Hole now.  The Fed meeting this week and the press conference on Friday will basically define the future.  The market seems to be betting on QE3 of some type, more treasury buying or something new, maybe we'll just start paying taxes directly to Citi cut out the middle man.  I think it can go a couple different ways.

1.  New "spending" is not really politically feasible right now as congress barely got the debt ceiling through, so I'm doubting they let the Fed increase it's balance sheet at all.  So Friday comes and the Fed does nothing and the market falls off a cliff and then the next day congress acts to save the day because no one gets reelected when the market crashes.  Basically the same thing that happened with TARP where congress votes no Dow drops 700 points and then the next day it gets voted through.

2.  Fed just does it anyway and congress goes crazy, but the market fly's up and so everybody just lets it go because people do get reelected when the market soars.

So basically I don't see any one making any real big moves until Friday, assuming a European bank doesn't collapse by then.