Keystone's Morning Wake-Up 9/14/12; The Day After QE3; Retail Sales; Consumer Sentiment

Chairman Bernanke overdeliverd. The bazooka was so large he had to tow it into the meeting room on its own trailor.  Oil is over 100.  Brent over 117.  Euro well over 130 on its way to 131. Growth assets around the world run higher. Emerging markets are up.  Copper is up. Gold to 1776. Shares in Europe nations are now approaching 14-month highs.  The SPX is at four-year highs, going back to January 2008 three months after the market top in October 2007.  The banks run higher, JPM has now recovered the loss from the London whale trading incident. The dollar/yen is 78.11 which now may require Japan intervention.

The FOMC move with QE3, which provides open-ended, easy money as far as the eye can see, is unprecedented. This is important economic history in the making. Bernanke targeted deflation with QE1 and QE2 but this time he targets jobs by simply throwing the kitchen sink at the economy and now hoping for the best. The Fed has two mandates, inflation vigilence and full employment.  The jobs situation is a handy excuse to jump in with QE3 ahead of the presidential election. The republican's are already crying foul but they would do the same thing if they were in the Whitehouse.  President Obama's reelection polls jump higher as the money flows like water.

Keystone was on the wrong side of the excitment yesterday with the short-term shorts. The CPC put/call and low VIX continue to indicate a significant market top is at hand as counterintuitive as it is. The QE3 program is odd since it was announced when markets were already highly elevated, rather than QE1 and QE2 which occurred just as the markets were going over the falls both times.  Keystone gave Bernanke too much credit going into the decision.  Bernanke is simply a milk toast chairman afterall, a hand maiden for the stock market. The banksters ran higher and Bernanke's boss's future job prospects are much greater now so it is obvious where his bread is buttered.  After the historic announcement yesterday, Bernanke shined the trader's shoes at the NYSE, then went out back to wash all their cars. Bernanke loses all credibility after yesterday, he is officially a lackey for the stock market now.

The idea behind QE is that it crates a wealth effect. This wealth effect, where people feel richer due to a rising stock market, then prompts them to spend more, which in turn pumps more money into the economy and helps jump-start the economy, which then leads to more jobs and happy times ahead. In addition to the consumer buying goods, the idea is that folks will buy homes, which raises the prices of all homes, further bolstering the wealth effect. This concept is targeted by Bernanke with QE3.  That, at least, is the theory.  With retail sales holding up all year long, Bernanke can make the argument, as he does, that perhaps his theory does work.  Keystone views this theory as rubbish.  In the end, QE3 is a Bernanke experiment, he does not even know what will happen. Retail Sales are released at 8:30 AM EST which are important in reference to the wealth effect discussion just presented.  CPI also hits at 8:30 AM and Consumer Sentiment should cause a market pivot point at 10 AM today.

The Spain and Greece situations remain toublesome.  It would not be unreasonable to think that the global central banker intervention collusion may be funneling money to Spain under the table to keep them afloat.  Now that the easy money is flowing in Europe and America, as well as China, it's all smiles in the trading world. How interesting this occurs on the four-year annivesary of the Lehman bankruptcy. The commodities will explode higher with gasoline and food costs escalating. Always thinking about the outliers, all this excitement can be meaningless in the grand scheme if the bombs start to fall and a war conflict begins in force in the coming weeks and months, especially a multi-national global conflict.

The uber low TRIN will want to see a market pull back. The Draghi bazooka was a two-day event with the SPX gaining another 5 or 6 points on the second day.  The S&P futures are currently up about seven going into Bernanke's second day of QE3 today.   A pull back of 15 to 40 SPX handles is a reasonable expectation, but these markets are far from reasonable with all the intervention occurring. The smoke will need to clear for a few days.  The best part of it all is that now Bernanke laid all the cards on the table.  He will monitor data and check in a couple months to see how the jobs picture is before deciding on continuing purchases, so every two months, we will see the jobs picture remaining sick and he will continue easing.  More details are needed on what he will watch as a metric since if a recovery should occur, folks will run back into the job market to try to get jobs, which will actually send the unemployment rate higher then necessitating more Fed easing. Chances are the payroll numbers will be more of a key metric and the monthly Friday jobs report numbers now take on epic importance moving forward.

The bulls want to run today but the economic data due shortly will influence the futures.  Bulls need to touch SPX 1464, if so, the upside will accelerate again with a test of strong resistance at 1468 occurring in quick order.  The bears are trying to stop the bleeding and will try to prevent the 1464 print with all their might.  Watch UTIL 478.48 into the closing bell today.  If UTIL closes under 478.48, the trading week will begin on a strong down note come Monday. If UTIL finishes above 478.48 today, the bulls are taking no prisoners, they plan on not only beating the bears but annihilating them. The euro just hit 131.