FED up with trading?

For those of you weary (like me) of a market that defies decades of proven tactics and makes anyone with a Cramer mentality (BUYBUYBUY!) and some cash deployed long an "expert" via a market that only goes up, I have some help. The Bernak has decreed that stocks will not fall on his watch. He has tethered his money-printing Quantitative Easing to unemployment, which is largely unaffected by the stock market rising. The Market is up about 100% from the March 2009 lows. Unemployment, if you believe the BLS data, is down about 1.5% from it's peak and stands at 9%. Please ignore the fact that 15% of the population (44 Million) is on food stamps but unemployment is only 9%.

The important thing here is the Bernak believes printing money and giving it to the big banks outright via the discount window for .025% interest (free) or buying treasuries outright (QE1 and QE2) will, by allowing the top 10 % of the population that own 85% of all equities to make outrageous returns via currency devaluation, create jobs. The "trickle-down" wealth effect. He has said numerous times he'll do "whatever it takes" (read: print more cash) to get unemployment down.

Never before have we had such crystal-clear insanity from our monetary masters, and the market reflects this new dynamic. It goes up. And up. And up. There is no fear, because the Bernak has stated he will print some more money if things don't improve. Or stocks go down. Either one. Wall Street is all to happy to play along, hence you get 93% win percentages out of the big hedge funds (JPM and Goldman Sachs) every quarter we have QE. "Just win, baby!" as Al Davis says. The only quarter they didn't do the (previously) statistically impossible? Q2 2010, when the Bernak had the audacity to let QE1 end in April. Alright enough talk here's the setup. The numbers on the chart are defined below. I simply calculated how much the FED monetized and what the market did and is doing as a result.

1-4. The FED announces various and sundry "Mortgage-backed security" buybacks where they agree to buy all the crappy loans from the big banks. On number 4, they announce the "Nuclear" option of buying another 1.25 Trillion. The fix is in, the top 10% knows it, and it's game on.

SM-The market, making only a few quick reversals to screw the bejezzus out of any shorts that try to play goes straight to 1150. Here we get a 9% correction exactly 3 months before the scheduled end of QE1. The Smart Money is taking some money off the table.

5. QE1 ends, and without free money from the FED everyone takes their ball and goes home. At the same time. FLASH CRASH and the Dow is down 1000 points in a day in May 2010, bounces, the market loses 17%, breaks key support, gets all the surviving bears on board and then...

6. QE2 Baby! The Bernak puts in the bottom in August with QE2 hints. Fry some shorts in hot oil and away we go again...until

SM. Smart Money seems to be pulling cash in mid-February 2011 with a mild correction...3.5 months before the scheduled end of QE2. Weird. So weird I thought I'd do the math. Here it is.

QE1 = 1500 billion = 83% rise in SP-500(March 2009 low of 666 to April 2010 high of 1220) The 666 bottom until first real correction at 1150 was a move of 72%.

We know how much the FED monetized (1.5 trillion), when they started (March of 2009) and when they ended (April 2010). We also see the market now stops going down when the Bernak fires up the printing press, and stops going up when he turns it off, and 1.5 Trillion buys you 83% higher SP-500. Enter QE2:

6. QE2 announced in August 2010, official in November. 600 billion. QE2 is 40% of QE1. The non-stop flight from 6. to the "Smart Money" correction should be 40% of QE1. QE1 went 72% so 40% of that is 28.8% . The February correction started at 1344.

1344 is 29.2% higher than 1040, the August "QE2" speech low. Cool.

The QE1 correction was 9%. 40% of that is 3.6%. Take 3.6% from 1344 and you get a correction target of 1295 on the SP-500. It hit a low of 1294.26 on February 24th. Cool again. Now, if QE2 continues to rhyme with Qe1 we'll have some sort of "event" to knock SP back down near that 1295 level, where the 50-day lurks. It will likely close below that, suck in some bears, and then gap-reverse /short squeeze it's way to new highs. This has been the pattern since March 2009. 40% of an 83% move would be 33.2%. Add that to the 1040 QE2 start point in August and you get a 1385 target for SP-500. Assuming QE3 isn't announced before QE2 ends (Bernake's already hinting, but he'll have a hard time convincing everyone $3.50 gas isn't his fault. On the other hand, maybe not Fed's lockhart says higher oil prices might lead to QE3). The fix is in...trade accordingly. The smart money's moving out now and won't be back til QE3 though...