THINKING OUT LOUD

This is an intraday tick chart of the emini SP 500 just for the last 3 days. You can see that every time we go down at all, mysteriously price always bounces back up immediately. Obviously in a true free market you would have some random action, we have none nowadays. Price moves are perfectly delivered to us in a nice neat little package. In a free market some declines would continue and some would not, especially on intraday charts. Just the fact that even intraday declines almost never happen for more than an hour is summary proof of what is happening. This leads me to the following question I keep asking myself, "Why did they allow 2008 to happen?"

It they have the ability to do what they are doing now, why didn't they do it before when it was more necessary? Of course there are a number of possible answers to this question. The big time conspiracy theorists like the Sham emails going around from some guy called "the falcon" would say they orchestrated the downturn intentionally. There are others, all though very small in number nowadays, who would say the Fed has no ability to control prices and people like me are full of .....

I think the reality is that the truth is somewhere in between these two extremes. The whole point of the PPT is to stop plunges from happening. That is the reason it was formed to begin with. It would make no sense for them to deliberately escalate that to which they exist to stop. On the other hand I can't find a market commentator who has any credibility, that has not admitted the Fed is creating this whole bull market. So where does that leave us? It leaves us with new market rules with one big asterisk. That asterisk is volume. Since we can see from the above chart, 2 of those 3 saves were in the overnight sessions when volume was light. It is easy to give money to banks and other institutions with a wink that putting it into stocks and futures would be a good idea ( what the Fed is doing ). It is also much easier to move the markets during the night sessions when volume is generally pretty light.

Last night was a great example of all of this. I was watching GOLD get hit pretty hard, some of the currencies were starting to get driven down, the ES went down 4 points pretty fast. Crude Oil was down over $1.00, it was looking like a small rollover was taking place potentially. Of course when I woke up this morning everything had been reversed back up once again. It is imperative that they do this on light volume. The horse got out of the barn during the 2008 crash, and once volume became that heavy, they could not do what they are doing now. For every 100 lot they did someone else was doing a 200 lot in the opposite direction. They chased it all the way down. If you look at the COT data it clearly showed what they tried to do but were just too late.

This is a chart I have shown before. You can see that "some" unknown player was buying huge amounts of futures contracts as this decline accelerated. The distance between those 2 arrows represents $32,000 per emini contract, or $160,000 per full sized pit contract! Does anyone out there know of any fund, or individual trader who would be able to withstand a loss that big? Of course we do not know where in the COT data the PPT's activities would be categorized, but by law it should be the Large Speculator category. The FED is not a government entity or a hedger. Large traders by nature buy on strength and sell on weakness. They are scale in and scale out players. I cannot find one other single instance of the Large Spec category ramping up that heavily on a huge decline in any market.

In this case they were eventually able to get this under control but they lost countless hundreds of millions or more doing so. It is my contention that they are aware of the possibility of another downturn and as a result are keeping as tight a rein as possible on things so that this type of scenario does not play out again. Once volume shows up and it gets going, the FED cannot throw enough money at it to stop it. This is kind of like a 4th down and a few inches. The other team crowds the line with everything they have. Generally those plays make or lose inches. However, occasionally someone breaks through and it is a breakaway play. This is what they are trying desperately to prevent. So far mission accomplished.

With all this in mind, if you are shorting during the night sessions, keep a very tight leash on the trades, and take profits quickly. Those moves in those sessions are going to continue. You should not be trading in and out during those time periods anyway, but some people can't help themselves. The new rules we are left with are basically we have a heavily one sided market, so at the very least if you take sell signals, you should reduce your size on them. There will come a time when the market will shift to a downtrend and that will be the time to be aggressive on shorts. If you choose to short stocks at least pick ones that are in weekly downtrends and not following the market as a whole. That should enhance your chances of success in those trades.

I have noticed a big sell off in Gold happening right at the moment. Readers know I think this is the bubble of all bubbles. Whether or not this is the beginning of something or not is impossible to tell. However, as I have stated over and over in here, when this breaks it will do so out of the blue and the exits will be more crowded than anyone could ever imagine. I do not have sell signals in the metals here, so I am not short at this point. I still think we will see $100 down days in gold when this starts and that is when we will know someone finally yelled "the emperor has no clothes." This move is the sham of all shams and I still maintain that view even though I have already been off by about 10 months ( an eternity ) about when I thought this would come crashing down. It is my contention that this and Equities are deliberately created bubbles by the FED to give people places to go to make good returns. We have seen them rotate bubbles over and over with Greenspan being the original orchestrator of such moves. However, my timing has not been correct here and I have had egg on my face due to it. However, I will be vindicated, I would literally bet my life on it.