I think now that even CNBC is talking about how Bernanke is controlling the stock market, it makes sense for someone to study the days over a larger time frame, where POMO was conducted. It is my theory that they are the new commercials for stock trading. The COT report has been completely worthless in the stock indexes for a couple of years now for a variety of reasons. I think that we have a much better indicator of stock prices with the POMO. The problem might be a small sample size. However, the correlation is so incredibly high, that even a smaller data set might provide reliable cues. My thinking would be that only buys be done on the days they are active, and on the non active days, take trades in both directions. If we know that virtually all the gains will come on the days when they are active, it stands to reason we would not want to be shorting on those days.
This is almost like insider trading, you really know which way the market will go before it ever goes there. The "NEW COMMERCIALS," the Fed, might very well be a key to riches. I sure want to be short once this PONZI scheme ends, but that may be next to impossible to determine in advance.
The above chart is of the Dollar Index, which does appear to be making a base here. We have had 3 probes at lower lows, yet the POIV indicator is diverging bullishly. This indicator does not diverge very often, which is also why it is more accurate when it does. It remains to be seen if the extreme market manipulation by the Fed to drive the dollar down will overcome this, it might. The momentum oscillator is in an interesting spot. It does appear to be diverging against price as well yet is also still under it's trend line, so it could go either way. I am leaning to the long side here due to the POIV divergence. It looked like the DX was breaking out last night, then of course it got reversed overnight once again.
The next chart which is of the EURO also makes me lean to the strong dollar weak currencies side as my next trades.
This is pretty much the inverse of the DX except that we did have a close above the prior highs that was quickly reversed the very next day and then was followed by a good down day yesterday. These trap patterns are amongst my favorites. It is my feeling that we need to hold right here in the EURO, or this could be a short term top of some type. The COT report shows monstrous short positions in commercials in currencies. As we have learned this is far from a panacea, but it does give us at least a reason to be a little careful about the long side until this chart conflict here gets resolved.
It also appears to me that the Bond market is potentially setting up another long entry, which all else being equal, might tell us the DX would rally with it. Of course as I have written ad nauseum recently, the world is basically one trade right now, long everything and short the dollar. With the "NEW COMMERCIALS" at the helm, it remains to be seen if they will allow any of this to happen right now.