Something we want to watch carefully

If you haven't figured out why in 2005 the economy was humming along, consumers had tons of cash from the insane valuations of their homes and HELOCS and they were spending it, yet now we are in the middle of an economic abyss and the market is higher than 2005, the simple answer would be F_E_D liquidity provided by a number of mechanisms including QE1 and 2 and as you know, the ever hopeful bulls salivate at each F_O_M_C meeting hoping to hear something about QE3.

In effect (or reality) the F_E_D injects liquidity in to the market, that liquidity ends up in stocks and the market heads higher, that's why I call the rally from the 2009 a "House of cards", it's not built on fundamental strength, but F_E_D liquidity injections and the hope of more.

However, this may just be a simple exercise, but there's more than one way to skin a cat. At 9:55 a.m. today the F_E_D conducted a repo-not a reverse repo which drains liquidity from the system, but a repot, under the guise of an "Operational readiness program announced August 2, 2012".

The total amount today, $600 million for a 3 day repo and $210 million from last Friday.

While this is nothing like the QE amounts from POMO operations, it's something worth watching.