The Fed Saves the Day

 | Jan 25, 2012 | 4:09 PM EST
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It's been a while since we've rallied on talk of the Federal Reserve's quantitative easing program, but that is what occurred today. There wasn't any specific plan mentioned for further easing in today's policy statement, but Chairman Ben Bernanke made it clear that the Fed is ready, willing and able to act should the economy falter.

Some might think that it was a negative that the Fed feels the economy is weak enough to justify keeping interest rates low until the end of 2015, but the prospect of endless cheap money had the bulls salivating.

This morning, it looked like the exceptionally strong report from Apple (AAPL) wasn't going to do much to spark the broader market. In fact, the S&P 500 and the DJIA were trading in negative territory despite the stellar news. But a whiff of quantitative easing from the Fed was all it took to light a fire. Precious metals exploded higher, the U.S. dollar was hit hard, and oil and commodities ran as market players rolled out their QE playbooks.  

The big question now is whether we can run further with QE talk in the air. We are already technically extended, and it looked like we might see some "sell the news" action on AAPL's report, but one lesson we learned about QE is that overbought conditions and light volume are irrelevant. Just look at the move from September 2010 through February 2011 to see the power of the Fed when it's running the printing press.

Chasing a thin, straight-up market is never easy, but fighting it has generally been a much bigger mistake. I'm not sure the market is going to fully embrace more quantitative easing, but it obviously is inclined to judging by today's action.

Have a good evening. I'll see you tomorrow.

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