Yellen is still the key

The market is throwing a hissy fit today because it fears, and probably with good reason, that QE2 is not going to be at all like QE1 and it's not going to be at all like the numbers Goldman and others have floated. Like I said a few weeks ago, the most important thing that happened the week of the Columbus Holiday was the Fed's #2, Janet Yellen's speech in which she lowered expectations. The market instead chose to follow the rosy path that GS laid out, and why wouldn't they? Their making money from it every day it goes on. It's amazing to me that the Fed #2 virtually says the same same thing the Wall Street Journal article said (reducing QE2 expectations) and no one listens. Well someone was listening, those breadth readings and the 3C reading (as I pointed out with GOLD and PIMCO last night) didn't come out of thin air, smart money was listening.

The question is now a question of who, and how big the who is, got stuck with inventory at higher levels. If some big "whos" got stuck, we should see the gap filled as far as they can take it, if not, then we won't see that much of a gap fill, but this looks like it may be a game changer... and right before the Fed blackout period before their next meeting.