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Quantitative Easing Part II? UPDATE: More Stimulus?

Though I’m reluctant to do so, I will mention Bullard’s uttering the words “Quantitative Easing” (if the downturn turns nasty) as a bullish event in my next “Bull/Bear Recap”.   

It’s no coincidence that once those two words were said, the market staged a dramatic reversal, erasing a 200+ point drop to finish positive.  At what point will market participants realize that QE does nothing except destroy the value of our currency?  While last time the market rallied 70% from the lows on ample liquidity from QE, it was also helped by an improvement in the economic backdrop.  We are in the process of entering a period or deterioration in economic activity now due to a number of secular reasons.  Fundamentals will eventually trump liquidity and the printing press, just ask Japan.  Our structural issues remain.  

While we may see a large rally (possibly lasting more than a week) on the back of this news, I think we’ll begin to see diminishing returns on these types of gimmicks, kinda like the 1 Trillion dollar Euro package which created a huge rally, only to wither away in the following days.   

Nonetheless, tomorrow I’ll look for confirmation if the stock market still has the appetite for more Koolaid and close some shorts.  We've been pretty oversold anyways.  Note, my long term bearish thesis remains quite intact. 

Disclosure: No Positions Mentioned

Update:  Larry Summers also called for more stimulus.  So the bulls must have been all over this news.

So we're in a sustainable recovery eh?