The hard selloff in equities Wednesday seems to have taken many by surprise, with various pundits arguing that the drop was directly because of Obama winning the elections.

However, as followers of my writings know, deterioration has been in place within markets ever since QE3. Our ATAC models used for managing our mutual fund and separate accounts have been warning of a harsh environment for equities, keeping us in bonds despite every “nouveau bull” in the world believing stocks could not go down in the face of the "Bernanke Put."

“ "Wisdom is the reward you get for a lifetime of listening when you'd have preferred to talk." ” — Doug Larson

The rhetoric over the decline is illogical given the behavior of price. As I stated on CNBC, if the decline were because of Obama, then 30-year yields would NOT have fallen as much as they have, the dollar UUP, +0.05% would NOT be breaking out after bottoming nearly to the day of QE3 being announced, and Italy EWI, +0.16% and Spain EWP, +0.50% would NOT have performed as poorly in sympathy.

No, my friends, this is because of the bizarre way markets are acting following QE3, which was *supposed* to force reflation back into markets. The corrective risks I have highlighted since the end of September have persisted for longer than I thought they would, and the harsh environment for risk assets may not be over yet given the message of price.

Further proof of this may be the behavior going on in the commodities markets. Take a look below at the price ratio of the DB Commodities Tracking Index Fund DBC, +0.31% relative to the S&P 500 SPY, +1.11% . As a reminder, a rising price ratio means the numerator/DBC is outperforming (up more/down less) the denominator/SPY. For a larger chart, visit here.

Remember how following QE1 and QE2, commodities rallied and performed better than stocks under the idea to buy on now for future inflation? The EXACT OPPOSITE has happened following QE3. In other words, commodities and the "supercycle" aren't looking too super, which again implies that the market is sensing the QE3 isn't going to force reflation.

Perhaps the market is under the assumption that unlimited isn't enough, and that the Fed may be countering itself through its open-ended buying. There is an argument to be made that by doing a mere $40 billion/month in a world where equity market cap is north of $55 trillion won't be enough.

There is also an argument to be made that the slow velocity of money, which has been a big problem for the economy, can only pick up if the crowd has a sense of urgency to use cheap debt. What's the rush if the Fed is willing to keep rates low for such a long period?

Whatever the reason is, price has been warning of a correction and deflation pulse for about six weeks now BEFORE the elections. So stop listening to talking heads, stop listening to pundits, and stop listening to spin. Instead, do yourself a favor, and listen to price.

This writing is for informational purposes only and doesn't constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Pension Partners, LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Pension Partners, LLC expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.