Calibrating The Market

I love the Fed's latest statement regarding QE:

". . . members wanted to consider further the most effective framework for calibrating and communicating any additional steps to provide such stimulus."

While the pundits surmise that the word calibrate means the Fed is simply deciding how much stuff it's going to purchase, I feel the Fed is trying to figure out just how, as if it's in over its head.

The Fed is starting to hesitate. Its bluff has been called. And it doesn't know how to play its hand.

But its members sure do know how to talk. Chairman Bernanke especially. He calibrated his big 8:15 am speech in Boston on Friday to coincide with options expiration for maximum impact.

It's no coincidence that he's speaking then. S&P options expire in the morning. Like any good Fed chairman, he loves to try to inflict as much pain as possible on the people that make his life miserable. The ones that won't get in line when they're supposed to. The ones that need to be perpetually jawboned whenever their belief in Fed omnipotence wavers. The ones that need constant placating with more and more easy money. But one of these days, he'll stumble. He'll show up at the big gunfight with a butter knife. And the grand illusion will be over.

As for today's action in the S&P, the .786 fib level of 1181.50 was exceeded yet the index closed beneath it. This together with the VIX hitting a fresh low this morning and then closing back inside its 2 standard deviation band, as well as the dollar which looks poised for one last down thrust below 77 . . . all this has me on high alert. I would love to see another marginal high in the S&P coupled with a slightly higher VIX and a barely noticed rejection of the next low in the dollar while everyone is preoccupied with Big Ben in Boston.