Continuation of last night's post

Last night I talked about the fractional gains the market has seen over the last 3 weeks, that's how long it's been since we've had even 1 day above 1%.

On the hourly 3C chart you can see distribution into year end, the red horizontal trendline was the last time the market closed with a gain of 1%. Over the last 15 trading days, the average gain has been .18%. Tomorrow the market will be closed and next week will be light volume, but after the new year starts and the prospectus business is out of the way, it will be interesting to see if the Fed can or will continue to support the market through their POMO purchases. As our member pointed out last night in his email to me, 


" In addition, keep in mind that this dramatic drop in refinance activity to nearly zero will also affect the early prepayment of MBS loans on the Fed's balance sheet.  It is this prepayment of MBS loans that the Fed is using to fund the POMO program.  Where is the money going to come from to continue the program through next year, more printing?"


The common answer would probably be "yes", they'll continue to print money, however, I don't think the Fed in it's nearly century long existence has ever come under the scrutiny of Congress as they will come the start of the new year. Ron Paul has openly advocated abolishing the Fed and at minimum, strip them of their dual mandate. This is the man who will be charged with oversight of the Fed. I have a feeling the Fed is not going to look the same come 2011 and may never recover the absolute independence they've had over their 98 year existence.