Market full of riddles - staying on course, is right.

Volatility centered around Bernanke's testimony, risk sold off when he failed to signal fresh stimulus and rebounded on the subdued outlook and his willingness to act if necessary.

That's what took place but does anyone know what this really means? Yeh. Nah.

Will there be any form of QE? I don't see how.

The current Operation Twist II runs until the end of the year so will there be urgency for the Fed to deliver additional QE.? Answer - simply is - an emphatic no. In particular when the CPI perked up a little on a 1.7% print and considering the skyrocketing landscape of Agricultural Commodities the CPI is unlikely to soften any time soon, if at all the rest of year.

The Fed and Treasury are hellbent on POMO until infinity with its grotesque budget deficit. We also saw Net TIC Flows (Treasury International Capital) come in at a whopping $101.7 BLN. Why is this important? Many participants refuse to pay attention to it as they fail to understand it. It is one of the major events in the market, as it is seen by most participants as the Government resource for offsetting the current Trade Deficit. Question remains; is this massive international capital inflows into U.S paper front running the Fed and Treasury on 30 year debt? Maybe. The Fed will be loving every minute of it..so why disrupt it?

So how to make money? Glad you asked, as the landscape is riddled with riddles it is hard to say. However as depicted in this entry Muddling Through The Chop I made a case the second half of year will be more bullish than not. Quite likely will not make sense to many as market continues to grind higher. The main element behind my thinking is that Central Banks have no alternative and no solution other than stimulate.

My greatest fear is the pop-rally will only be short lived until say Mid August. China is the main player that has capacity to catch the market off guard and has plenty of room to move in its current stimulatory cycle - and it is in a stimulatory cycle.

TNX - Likely double bottom trading at 1.5% rising 37 basis points on the day (+2.53%)
VIX - Down 3.63% to 16.52 for the day and no end to the complacency.

How fearful am I of an epic crash? Very!!

I will post a chart on current SPX/TNX spread. This disconnect is a monster and needs to be tread with cautiously. Stocks and Bonds are two separate asset classes and they are both going up in tandem in bubbly fashion. Bigegr than Ben Hur - you betcha

Until that mess is resolved - and it will be resolved. For short term opportunities, you will need to be quick and nimble for rest of week. I can post ideas but it really is up the reader to interpret them correctly as I am simply unable to click the buttons for you!

Until next time.