I COULD NOT PASS ON THIS ONCE I FOUND IT
As I have talked about this over and over, I just decided to surf the web to see who else might be popping off about this and found something I just felt was too good to pass by. Here is another crime scene photo from today in the SP 500. Once again right as we were on the verge of rolling over big right here, a magic 60,000 contracts were bought right at the low at 11:30. I have labeled this ab normal. You can see to the left a more normal distribution where you get accelerating volume on a sharp down move which exhausts itself, then the market rallies. One thing we have seen happen over and over, but not every day, is what is on the right. A mysterious buy program that comes out of the blue when one would rarely come along. The next chart is another example of one even more obvious. The very last day of last year in the last 10 minutes of trading you can see 160,000 contracts were bought in the last 10 minutes! Hmm... do you think someone wanted to make sure the year closed off on a strong note? You could have argued that was short covering for year end but the market was up the whole day so that is not applicable. It is what it is folks.
You can damn well be sure if these were sell orders and not buy orders, there would be hell to pay for this type of thing. The fact that it has an upward bias of course is good for average Joe, but I maintain that this type of market manipulation should not be allowed up or down. Just because it is up because the Fed is behind it does not make this right. This is why the market has a very strong upward bias now. The "mystery" buyer who can be relied upon at our darkest moments. I found the clip below which puts some actual numbers to this and it also explains why this can't be done every single day. This was actually from 2009 and it was aired on a fox network channel. It was an interview with a couple of traders.
“Something strange happened during the last 7 or 8 weeks. Doreen you probably can concur on this -- there was a power underneath the market that kept holding it up and trading the futures. I watch the futures every day and every tick, and a tremendous amount of volume came in at several points during the last few weeks, when the market was just about ready to break, and it shot right up again. Usually toward the end of the day – it happened a week ago Friday, at 7 minutes to 4 o’clock, almost 100,000 S&P futures contracts were traded, and then in the last 5 minutes, up to 4 o’clock, another 100,000 contracts were traded, and lifted the Dow from being down 18 to up over 44 or 50 points in 7 minutes. That is 10 to 20 billion dollars to be able to move the market in such a way. Who has that kind of money to move this market?
On top of that, the market has rallied up during the stress test uncertainty and moved the bank stocks up, and the bank stocks issued secondaries – they issues stock – they raised capital into this rally. It was perfect text book setup of controlling the markets – now that the stock has been issued…”
Just the sheer enormity of that number is staggering to me. Let's assume that his numbers are correct. Just that one little move required billions of dollars. Now do you wonder why the Fed is unwilling to open their books to the public? It is true they are making a profit doing this because they are able to keep the market ever creeping higher. However, during the 2007 - 2008 selloff they lost their ass in these transactions, and those are the ones they do not want exposed. Furthermore, it would expose that underlying frailty of the bubble we are once again building. They just continuously operate on the assumption that we can't deal with the truth, so they give us one bs story after another. I feel we should have free markets, but we don't and that is all there is to say on it.
The one thing I completely fail to understand is why they won't let even a 5 or 10% correction happen? This in my opinion is what leads to these horrible crashes we get. They become reversions that are so past due, that they are much more violent than they otherwise would be. It must be exhausting to monitor things this closely and launch these strategic buy programs "when we all need them."
I think if you trade the stock indexes even if you use daily charts now it might not be a bad idea to take profits if you get a good hour or two down, then re-enter them on bounces. In other words trade around a position. Tuesday did give an outside bar in the ES with divergences galore, normally a very good selling spot but not now. Had you taken that trade you would have been smoked. Shorting almost anything has been immensely difficult, you are almost guaranteed a $500 to $1000 pullback even in the trades that wind up working. There will be a washout that will just free fall once this breaks out if even for just a week or so. However, trading off trying to catch it, against the large majority of the trades being ulcer builders, I think just warrants a different strategy. These are not normal market movements we are seeing here. I know as long as I live I will never forget this time, I have just never seen anything like this in the way of market manipulation. It is unprecedented and seemingly unending.
As I have said many times, stick by your core strategies but be very careful of shorts no matter how good they might look. You don't want to be the one that Fed took out of the game before they backed off what they are doing. The markets are rigged here so be aware of that and act accordingly. We should still have a downside bias here, but it is going to be rough sledding going down, not for the faint of heart. If they do ever allow a correction, there could be a big trade to be had on the long side following it.
The dollar/gold correlation is going to have to wait another day.