You gotta love the headlines from one day to the next:

Wednesday morning – Feb 20 – Headlines scream – BULL

Stocks Ride Deal Talks to Oct 2007 Levels! M&A Activity Causing Investors To Celebrate; All Time Highs Within Reach! Markets Signal Good Times Ahead!

On Thursday morning – Feb 21 – the headlines scream – BEAR

Stocks end on the Lows, S&P Logs Worst Day of 2013, DOW Ends Below 14,000! VIX Soars 18%; FED Signals Caution Ahead, FED Growing Doubtful About QE Infinity – And the kicker is that Dennis Gartman – of the Gartman Letter tells CNBC -

“The Music Has Stopped, I’m Getting Out”…..The Fed’s signal that it may not continue its bond buying program is a game changer for global equity mkts…

So the message is – as long as we are protected by the FED – then it’s ok to dance – BUT when the music stops run for the exits…

It is on the verge of psychotic – no? On Tuesday – there wasn’t enough good news – yet the mkt surged higher – teasing the all time highs – S&P closing at 1530…..and then yesterday the mkt toyed with S&P 1525 all morning – looking to see if what was resistance can now be support – all day long the mkt held in….then talk of: What will the Fed say? Will they announce a pullback? Will they end QE?

Just two months ago – Uncle Benny came out and said that the FED was committed to remain in place UNTIL unemployment reached 6.5% – period the end. But according to the minutes –

“a number of participants stated that an ongoing evaluation of the efficacy, costs and risks of asset purchases might well lead the committee to taper or end its purchases before it is judged that a substantial improvement in the outlook for the labor market had occurred”.

Is Uncle Benny finally throwing up the white flag? Is he acknowledging that the QE stimulus is doing more harm than good – that they have not been able to create real jobs and worse yet – they HAVE BEEN able to create inflation in the very things we need daily – food and energy…in fact yesterday’s PPI report shows that fresh veggies are up some 39% over December with overall food prices +0.7%. Throw in a rise of 15% in gas prices ytd and the expiration of the 2% FICA holiday, potential automatic spending cuts, 750K job losses, – and the picture looks a bit bleaker…. Have we reached the point where a recession could be developing even after all of the money that Uncle Benny has printed? Could the FED be sowing the seeds of DEFLATION?

Take a look at gold – a leading indicator for the economy – down $41 yesterday – it is down 7% ytd and is down 13% from the highs of October of $1800/oz. Silver down, crude fell and the dollar spiked higher as global investors found safety in the dollar…

Move around the world and what do we see? Europe still in a mess, Political instability across the region – The whole of the Bulgarian gov’t quit yesterday over imposed austerity measures – did you see it? Can Greece be far behind? And in Italy – a comedian -Beppe Grillo – has a shot of becoming PM – Can you imagine the SNL (Sat Night LIVE) skit if that happens? and in Spain – the graft continues…..In Japan – Abe – is engaging in a “non- currency war”, North Korea is setting off atomic bombs and Iran and Syria continue to play “bully on the world stage” – is it me?

Mkts across the globe were and are under pressure overnight….as the “FED sparks Asia Sell-Off” Worries mounting that the US is taking away the punch bowl … Japan -1.4%, Hong Kong -1.7%, China – 2.9%, ASX -2.33%. In Europe more of the same as “Fed Policy Weighs on Europe Shares”…. and in early pre-mkt trading – US S&P futures are down 5 at 1502…..Why is anyone surprised? Did you really think that the rising stock mkt and stability in housing prices is because the economy is turning around? Could the Fed have manipulated global mkts without anyone knowing? Now – who is drinking the Kool Aid? The commentary that many pointed to that “the FED may not continue its bond buying program down the road” borders on the ridiculous…I mean think about it….OF COURSE THEY ARE NOT GOING TO CONTINUE -DOWN THE ROAD – at some point they will stop the insanity – but not now.

With the pending sequestration cuts, tax hikes, job losses AND the debt ceiling issues all on the horizon – events that have the potential to disrupt the global financial mkts – is Uncle Benny really gonna pull the plug now and add fuel to this fire? NOT A CHANCE. His commentary that the FED will look at the program in March is nothing new – they should be looking at the program daily – in fact they should never have begun the latest program at all…but they did –so now they are in it….pulling out or scaling back is not an option at the moment….They should have considered the implications months ago….when many economists told them to back off……but we were in the middle of an election…..couldn’t have the mkt crash prior to that!

BTW – this issue has been simmering under the surface for a while….we all knew that at some point – the FED would have to acknowledge the unintended consequences….– now it becomes news? What happened to all of the analysts/strategists that have been telling us that we are on our way…no worries! The economy is fine – the sun is shining, the water’s warm……And then yesterday – all of a sudden those same issues become important and the mkt gets skittish….HELLO? And think – all he said was they wouldlook at it in March – he did NOT say – We are scaling back beginning in March – and the S&P logs its worst day in 2013? DOW plunges? Just goes to the real nervousness out there…

Put it in perspective – the mkts are up some 7% ytd….up some 12% in 3 months, up some 45% in 2 yrs….on what? A recovering global economy? Clearly not so much – right? One Fed statement that “considers” a change and global mkts fall out of bed? The news has not changed at all – the same concerns exist today that existed one month ago – yet the mkt ignores the bad news until its convenient not to and the computers begin to generate sell orders and all of a sudden the sky is falling? How long have some of us been calling for a correction? The advance made zero sense? The mkts have been manipulated – that is now clear….. What was driving it higher – the FED – so what now causes it to sell off? The FED! They are in, then they are out, then in, then out – the mkt surges and then plunges, surge/plunge – I need an Excedrin…

The FED indicated that the economy remains on a moderate growth path and that there has been some reduction in downside risks facing the US economy. Strains in global financial markets have eased somewhat, and U.S. fiscal policymakers have come to a partial resolution of the so-called fiscal cliff. The algo’s did not want to hear this – they want the juice – the Kool Aid.

Ok – so the mkt will test the 1490 level on the S&P – if it does not hold – then look for 1460… A mouthful of economic reports today – CPI exp of 0.1%, ex food and energy +0.2%, Init jobless claims of 355k, Cont Claims 3.15 mil, Markit US PMI – 55.5, Mort deliquencies and foreclosures, Philly Fed exp of 1.1, and Existing Home Sales -0.8%.

Like I’ve said – the mkt has had every reason to sell off a bit to re-calibrate – but never did (FED) maybe now it can – remember Pres Harry Truman – “A pessimist is one who makes difficulties of his opportunities and an optimist is one who makes opportunities of his difficulties”

Take Good Care