The chance of a QE3 announcement today is not insignificant. Traders have told me it’s as high as 10-20%.
I just don’t see it happening today but the trade would be same as QE1 and 2 and it would be epic. Stocks would soar, the dollar crater and gold would be on its way to $2000. If nothing is announced, expect a small dose of the opposite.
If QE3 isn’t announced, the market will be trying to read between the lines to see how likely QE3 is in the future. To me, this is the trade that will last beyond the initial knee jerk. If the Fed doesn’t step closer to QE3, stocks will kick and scream; the dollar will rally (esp. against JPY) and gold will be on its way to $1700.
