We have heard it all before. The market is going up because of QE2. The Fed has got your back. And yes, from early November to mid- February that is all the market did -- it went up. But a funny thing happened along the way -- just when investors got comfortable with the idea of a sure thing -- somebody or something pulled the rug out from underneath them. And oh my goodness, the SP500 is down a whopping 5% from its highs. Ruin!!

And QE2 still continues. So was the reason the market went up in the first place --i.e., QE2 -- the real reason? Or were gains driven by the usual mis-placed perceptions and psychology? If the market continues lower despite QE2, I guess investors will need to reassess their notion about QE2 and possibly QE3.

So how good has QE2 been? Looking at a daily chart of the QQQQ (figure 1), we note that yesterday's lows were in right at the November breakout point that lead to 55 day speculative rip higher that was fueled by never ending QE2 and Fed support for the market. Our virtuous cycle isn't virtuous at all as stock prices are nearly back to the levels when the asset purchase program started.

Figure 1. QQQQ/ daily

So I guess QE2 hasn't been that good. Stocks haven't gone anywhere. Yields aren't lower. The housing market isn't better. The labor market isn't better. Inflationary pressures are starting to percolate under the surface.

Ahh, but in bureaucratic speak we can only imagine how terrible things would really be if we didn't have QE2. Thus we can spin QE2 as an unqualified success.

And so what is our response to all the recent ills afflicting this market? Of course, more intervention.

This is all you hear these days in response to a lower market or market that isn't doing what the "authorities" want it to do: intervention. The Yen is up (and not doing what we want it to do), so let's intervene. The markets are off their highs, so the G7 should discuss ways to prop up the markets. Stocks are opening lower because of the problems in Japan, and one well known TV commentator pondered if the Fed should signal its intention to intervene and support the markets if needed. And on and on.

Where is the free market? And shame on those who call themselves capitalists yet expect continued intervention.

And remember, the SP500 is only off its highs by about 5%. I cannot wait to hear the clamor if the markets slip another 5%.