I DECIDED TO THROW OUT MY CHALLENGE FLAG ON THIS PLAY
After watching the market action for the last 2 months I decided to throw out my one challenge flag and risk losing the time out. This play had to be reviewed by the people in the booth for a ruling. Here is what they looked at. I found this at Trading Markets.com, a great trading website, and home of one of my original mentors Kevin Haggerty. He posted this chart in his most recent commentary. I first learned of the PPT from Kevin, he knows exactly what they do and how they conduct their little "activities." The Feds Permanent Open Market Operations ( POMO ) is shown above and low and behold you can see on the days where nothing was done the market has been completely flat. The whole recent rally has happened on days of POMO.
You can draw your own conclusions about this, but of course the answer to the quiz question is obvious. I was not charged a timeout and it was agreed something was wrong. There are a number of ways of how this money that gets injected drives stock prices, and I will leave that up to you to decide which one of them best explains this. I have an idea of how this is happening but am not going to get into it further. The chart above says more than I could possibly say if I talked for an hour.
This does not change anything I said in the last post at all. I just found it compelling enough when I stumbled upon this to post this here. For those wanting what I consider to be one of the best prognosticators of stock price direction, check in for Kevin Haggerty and his comments at Trading Markets. He is one of the best.
The interesting thing that has developed over the weekend is the bashing of the Fed by foreign governments. I believe that is the beginning of what will wind up being a currency devaluation battle that will ultimately drive the dollar way up and everything else down. These other countries are losing a bundle on the debt of ours they own with the deliberate devaluation of the dollar the Fed is conducting. I think at some point they will start buying dollars to prop it back up. What we could have then is other countries intentionally trying to drive our dollar up and the Fed trying to drive it down. This could get very interesting, it is must see TV coming soon. However, it might be best to tune out before watching the ending, it is not going to be pretty.
As I looked through the commodity markets I found one market that is in an interesting position right here, Soybean Oil. The weekly chart for this is below.
I have marked off the instances where the Small Speculators have gotten excessively bullish in the past, at the same level they are now. You can see that what happened in almost every instance was a pretty good decline. The one exception was a time when we were not overvalued by the Will Val indicator. We are overvalued there at this time along with the huge Small Speculator long position. This is a market to look for sell signals in. It is much weaker on a weekly basis than most of the other grains, and has this fundamental condition to go along with that. The daily chart does not have a sell pattern yet, but I am watching for one closely.
I do expect a pullback this week in stocks, but again if the Fed does not want one we won't get one. It is all up to them unfortunately. In scrolling through the SP 500 stock charts one at a time this weekend I found a bigger dichotomy than I expected. This rally is more narrow than I thought. Normally this would be a red flag, but things aren't normal.