By Phil Flynn
Energy bears are stunned. They say it is impossible and there is no reason for it. Energy seems to be defying gravity. The bears and the rest of the world are waking up to the fact that something has changed in the energy complex.

Petroleum and now Natural Gas are soaring despite the fact that the supplies are overwhelming. There's shock and disbelief that oil and gas can defy the normal historical reactions to supply and demand. Traders are calling me and are stunned with no idea of what is happening.

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But of course readers of this column and watchers of the Fox Business Network are not surprised because we have reported to you that the world had changed. And we even told you the day it all change. It was the day the Fed made the move to quantitative easing. That was the day that the Fed printed a floor under oil as well as many other commodities.

The day after that decision I wrote a little ditty called, “I fought the Fed and the Fed won” and it went something like this…“I fought the Fed and the Fed won. I fought the Fed and the Fed won. Needed money so they printed some, I fought the Fed and the Fed won."

What is that they say about never fighting the Fed? Well at the very least do not underestimate the way this Fed can change the marketplace. The Fed's timing of this move to quantitative easing still has the market coming to grips with the shorter and longer term effects on the economy and the markets.

The one thing that is for sure is that the rules of the game have changed. And when it comes to a knife fight and Fed power there are no rules. Someone say one, two, and three, gold! In a blink of an eye the Fed, with its unlimited power to print money, can change the dollar value of a commodity or its long term trend in an instant.

By creating inflation and money out of thin air they can change the entire commodity trend as we know it and drive away the deflation demons of that particular moment. Being short commodities has become a more dangerous proposition and the Fed has put us on notice. At anytime they can run the printing press and change the fate of a commodity.

They do this not because they created a global shortage of a commodity or because of sky rocketing demand. It is because the Fed has the ammunition to make it so.

Oh sure you can say that the Fed's policy of quantitative easing is as simulative to the economy as a good old fashioned interest rate cut. But at the same time, it has the potential to be much more inflationary.

And now that the Fed has opened that Pandora’s Box, the markets are now from this point forward having a more complex element to them. And in light of these developments, you should be opening your trading account with me. Call Phil Flynn at a800-935-6487.

The day I reported that the Fed won I also said, “There are two possibilities. One is that the economy is much worse than it appears. The other is that the Fed thinks things are getting better and wanted to give some shock and awe stimulation to this feeble recovery with the hope it will turn into a full-fledged spurt of unbridled economic growth.

Inflation can be ok as long as it comes with economic growth. The Fed's gamble is that this will stimulate the economy by removing the deflationary risk and drive down yields to get businesses and mortgages moving again.

The problem is that if we don’t get the growth to overcome the inflation risk, you get dreaded stagflation. The fear is that the Fed move might not be simulative enough or will not have the desired effect. For commodities and oil this is just an inflation play. If oil is driven higher just because the Fed is printing more money as opposed to improving demand, then their move may actually damage the economic recovery.

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