The Fed is buying Treasuries, but it might as well buy S&P 500 futures and take in the gains. Instead, it is giving them to the banks and funds who are using the influx of cash to buy stocks. It is a Ponzi scheme as this market doesn't trade with a natural flow. These shenanigans will go on till June when QE2 is set to finish, but will they come up with a QE3?
That is very possible if the unemployment rate doesn't start coming down. But what will be interesting to see is if the economy is doing better and there is a slight improvement in unemployment, will it be enough for Banana Ben to stop the endless QE? Obviously the inflation numbers will be rigged to remain extremely low despite what is actually going on so I ignore that as a factor.
Actually the worst thing that could happen for this market would be for the nonfarm payrolls to start printing strong numbers and for there to be a stronger economy. That would make it tough for there to be QE3. Once QE2 expires, we'll probably be at even higher levels than now making the market more vulnerable to the natural forces of the market.
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Even good news is repackaged into a bad news for a bear. Anything to suit the trade.
Repackaging good news? I am calling it like it is. The Fed is manipulating the market, and that can keep prices up in the short term, but it doesn't make stocks any more attractive in the long term.
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