For months we have been warning that the only thing that can allow QE3 to proceed is a 25% drop in the S&P. Of course, algos and their idiot Ph.D. creators would force the robots to gobble up every drop due to beyond inane mean reversion and BTFD triggers. Well, today that realization is finally dawning (as hundreds of 19 year old quants suddenly find themselves out of a job). As the chart below shows, however, the market still has a long way to go to the downside, so for all those buying here and the market will promptly soar on hopes QE3, disappointment seems guaranteed. In the meantime technicals still rule, with the ES now at November 2010 swing highs, which will likely be taken out soon, and will tumble to the December swing lows, just above 1150, after which it is rough sailing down to the 1000 level of Jackson Hole at which point the market will be begging for QE3. Of course, all this assumes that Bank of America does not blow up in the meantime, as everyone has been warning. With its CDS 18 bps wide to just under 200 bps today, unlike Ben Bernanke, we certainly can not promise that.