Hand Stand

Downpour on my soul
Splashin in the ocean, I'm losing control
Dark sky all around
Can't feel my feet touching the ground
--Jars of Clay

The tape has an unnatural feel to it. Even the shallowist of dips bought. Monlithic price movement. Charts have a strange low intraday range, steady march higher pattern since Sept (which corresponds to QE2).

A few yrs back there was speculation that the Fed was buyin' 'em clandestinely. I would not be surprised if that was happening now. The Fed needs asset prices higher to prevent large-scale margin calls from debt declines. Moreover, the Fed loves the 'wealth effect' theory--that people will engage in more spending if they feel richer.

Some believe the Fed has already overstepped its legal (not to mention Constitutional) authority with its quantitative easing programs. Buying stocks would merely extend already extreme behavior.

That said, it would seem that nefarious buying by government sources could only 'work' at certain junctures when market participants are uncertain about what to do. Absent other info, confused market players are more likely to see higher prices as a signal to jump on board and follow the trend. If however, a general proclivity to sell hits the tape, then government price support tactics no longer work. Even an invisible hand by govt can't push markets around when big time selling pressure hits the tape.

Meanwhile, the muni bond market is listening to more chin music. The new Congress is in session, and new Tea Party elects are talking tough about bailing out flailing states. Muni markets appear worried that the tough talk will morph into tough action.

Stocks either don't believe it, or they are just don't see it.

position in TLT, SH