Treasury bonds, having been firm since early April, have reloaded the wizard's smoke machine to a degree. He can go behind the curtain and pull some levers now. A market full of pigs at the trough will cheer for QE2, as that is the only perceived hope to get what the pigs all want; namely RISING ASSET PRICES, i.e. the lagging effects of inflation.
Gold is the canary and it shot up this morning. USD is the would-be host of the frightened herds upon a deflation scare. Gold's knee jerk reaction says it ain't gonna happen. USD is at support. Nothing is resolved in one pre-market jerk. But we are one day closer.
The markets are the markets. There is drama in play and if you are not thoroughly into this and having the time of your life market wise, you are probably well adjusted but, for the geeks this is the time of their life - or should be.
Disclosure: No positions mentioned