While the US is only now embarking on QE3, on Tuesday night, to much fanfare, the Bank of Japan, in sympathy to the Chairsatan, launched QE 8. As we reported [10], the entire JPY10 trillion incremental intervention was fully priced in and digested less than 9 hours later, confirming that monetary policy is now completely helpless to do anything but destabilize currencies for a brief period of time (and at every greater dilutions). Here is how this farce of central-planner hubris looked through the eyes of UBS' veteran trader Art Cashin.
From UBS Financial Services
Japan's Eighth Version of Quantitative Easing Has Brief Influence – The Bank of Japan, which first began Quantitative Easing back in the year 2000, reached back in the closest and brought out version number eight.
It was a rather obvious attempt to weaken the yen and it achieved that goal – for about 27 minutes.
Europe and the U.S. awakened to find Asian markets rallying in response to the BOJ initiative. They decided to join the party. Before they could get fully started, the glow started to wear off.
The yen, which had fallen on the BOJ move, began to rally.
In New York, stocks opened rather neutrally. At 10:00, they got a big boost from a jump in existing home sales. Stocks began to rally, led by the homebuilders.
At 10:30, the markets were surprised by a huge surge in crude inventories. That was the second half of a one/two punch.
Earlier, Saudi Arabia vowed to increase oil production to help clients, especially Europe.
When the inventories hit, an already shaky oil market plunged sharply. Coming on the back of Monday's trapdoor plunge that quickly sent the stocks of oil companies spiraling lower, taking the futures down in a nano-second.
Luckily, the plunge was short-lived and the bulls regrouped in a matter of minutes. By late morning, stocks were back in rally mode, aided by the late session firming in Europe.
In early afternoon, the rally stalled as it grappled with napkin resistance (S&P 1464/1467).
Stocks backed off to regroup and retried the rally late in the session. Again, they were turned back at the resistance.
There was a somewhat incongruous fade in the final ten minutes. It was incongruous because the market on close orders were officially tilted to the buy side. Traders thought the fade might be a function of more position re-juggling in front of Friday's reweighting.