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How Much QE2 is Already Priced into the Market?

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Friday's employment report has the Street eyeing more quantitative easing.

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With five weeks finished in the NFL season, there's two ways to look at the AFC West. The Raiders, 2-3 after a thrilling victory against the Bolts yesterday, are tied for second place behind the Chiefs. OR, for those who view the glass as half-empty, Oakland is tied for last in arguably the weakest division in professional football.

How can two people look at the same competitive landscape and see two diametrically opposed views?

That's what makes a market and it for sure is making this market interesting. Following Friday's "not bad meaning bad but bad meaning good" employment report, folks were quick to cast their eyes towards the mother ship that is QE2.

Forget for a moment that the savvy seers at Goldman (GS) have estimated $750 Billion to $1 trillion of QE2 is already priced into the market. When it comes to meaningful catalysts, investors like to buy the rumor. It remains to be seen what happens if and when the news is announced.

Over the weekend, global leaders met in an effort to stem the growing chorus of "Currency War!" When they broke yesterday to watch the Sunday games (I added that part in), they were no closer to a truce than when they began. Why might this matter? Protectionism is the "other side" of globalization and should this continue to escalate, few, if any, nations will emerge unscathed.

We enter today's holiday-thinned session with the bulls in control above S&P 1150 and near-term resistance lurking at S&P 1170 and S&P 1200. With alotta Street peeps taking a three-day weekend (those lucky ducks), the ranks promise to be thinner than usual, which could lend to an uptick in volatility.

Keep your eyes open, your risk tight and your head tip-top; schvitz hot and second-to-none as we together find our way.

Random Thoughts


R.P.

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