At Some Point the Fed Will Have to Concede
The time will come that the Fed and Congress will have to jointly concede that the economic issues we are facing are structural and cannot be fixed by continuing what led us into this mess, ie. cheap money. In the meantime it looks like the markets are focused on more hocus-pocus and eventually QE2.1 (QE3 would be politically dangerous). What this means for now is that the markets have a tight ceiling and a floor and little direction will develope for some time.
As to Congress, they will have to come together with some balance, less spending and more taxes on the top end. Without this needed balance we are just waiting for things to get worse and they will.