I thought Art Cashin said it best today when he said:
It is becoming far more evident that the true purpose of QE2 is not to hold down interest rates. It is, instead, to raise asset prices, especially stock prices.....QE2 is beginning to look like an open-air multi-month version of the PPT.
Bernanke has taken over the throne of market god and he believes he has the wisdom to know what asset prices should be. Let's not believe in the market and what prices the market sets but we need a czar to decide where stocks should goes.
What this means is the markets are firmly in control by the Fed and the markets will not go down until an event occurs that the Fed can't control. What would that look like? Europe fracturing at the seams. Or Japan. Or Ron Paul gets some power over the Fed.
It is absolutely amazing to me that the Euro continues to climb. Look at these bond spreads. European stocks are making new yearly highs also. This should be yelling danger.
The problem with this of course is the Fed is the market. This is no different than the upteen manipulations throughout history. Look at the chart below. It is a manipulated market and the manipulator eventually lost control. Can you tell which market it is?
This is of course the silver market and the manipulator was the Hunt brothers. So pretend you know it is a rigged market. You know it is going to crash but pretend that is all you could invest in. At what point do you invest? Do you go long and try to get out somewhere near the top? Do you short and if so where? 10, 20, 30? How long is it going to last? Because the graph covers such a large time frame you lose the sense of time. That was really a 3 to 5 year event before it all played out.
The market is bigger than any manipulator. Eventually the manipulator loses but it could take a long long time. Bernanke will lose this and it will leave a trail of tears but in the interim I have no idea how you or I or anyone elses successfully plays it without it just being a gamble.
Economic data hasn't been bad this week. I find it interesting that the market surged on the worst data of the week. Jobless claims were way above expecatations. A few more Americans lost their jobs. Perfect - the stock market can surge.