With the market not sure what bad news would send it soaring today, here comes the Philly Fed to save the day by tumbling from October's 19.8 to a paltry 6.5, slamming through expectations of 15.0. This is the biggest miss since February and assures that ahead of today's POMO there is enough ammunition for a stock ramp to end the three days of declines. Since the economy is once again sliding on every possible banana peel, we can calmly go back to the "market" ramp.
The Fed has become masterful at blowing insane investment bubbles. Like all bubbles, they eventually burst (LTCM in the late 90's, 2000 Dot Com crash, 2006 Housing Market Crash, 2008 Leverage Crash). This time will be no different. For now, the Fed has managed to bypass the laws of rational finance. Who knows how far they can take it this time, but eventually you ignore fundamentals at your own peril. The Fed is already losing control of the bond market. I suspect we'll muddle through the holidays in a sideways to slightly up bias followed by a possible stock market reset happening sometime in conjunction with the next debt ceiling debate early in 2014. This could erase many months of gains in a few days. Is it really worth buying (or holding) at all time highs and trying to capture the last 3%-5% of upside in conditions like these? We'll soon know.