Market Has QE3 Fed Easing on the Brain

The market has QE3 on the brain.

Stocks and commodities rallied as the Fed minutescame out.

Some traders clearly felt that the Fed was signaling a third round of quantitative easing (QE3) solely because they acknowledged discussing a range of easing options.

"A few members felt that recent economic developments justified a more substantial move" seemed to be all that was necessary to get everyone salivating again.

My usual policy is not to fight the tape, but really: this may be a case where traders really are hearing things (that you, Grandpa?). The Fed is deeply divided; they couldn't even seem to agree on whether inflation posed an imminent threat or not.

Respected analyst Richard Medley, whom I had on last week, said that if Bernanke tried to force a vote on QE3 right now he would likely have five dissenting members. That would be unheard of.

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