Monday morning

+ Europe higher across the board: CAC and FTSE up about 2.5%, DAX up 1%.  Euro is up slightly to 1.4425.  I will keep a close eye on the 1.4450 level.
+ Chicago Fed a little better than expected.  -0.06 vs -0.48 expected
+ Treasuries slightly lower

- Gold reached 1890 overnight extending the parabolic move higher.  It's off the highs but still up about 1% to 1866.  SPX futures up 1.65% pre mkt.  Less inclined to buy the open (still bullish but less so than pre mkt Friday).  If we continue to rally today, I want to see a Euro break out above 1.4450 and lower gold as bullish confirmations before I chase.

Big story this week is the Jackson Hole conference on Friday. Bernanke is in a sticky situation because he is faced with lower growth expectations as well as elevated inflation.  The commentary I am paying attention to is whether he believes these trends are temporary or permanent.  If he emphasizes the "transitory" nature of inflation, the FOMC will be more inclined to increase quantitative easing, although I don't think they can say QE outright given the opposition from politicians like Rick Perry.  The most likely alternative in my opinion is extending the duration of their portfolio by selling short dated bonds and buying long dated bonds.  This will not increase their balance sheet and will attempt to lower longer dated interest rates which will help the real estate market. The Fed did this in the early 60s and the program was coined "Operation Twist," so I'm calling for a OT Redux.  Many analysts, however, doubt the effectiveness of this plan because it only managed to lower long term rates by about 15 bps.