The FIX Is In

Or How the Bulls have Rigged the Stock Market

On the surface its simple and been covered in past Investors411. The Fed prints & dumps money into the economy. Yesterday’s dump was 8.309 billion More money  = more wealth in USA. This drives the dollar down relative to other currenies and US companies sell more goods abroad because they are cheaper.

But the devil is in the detailsThe FIX is being run by US shadow banks, our opaque central bank/The Fed & The Treasury. Here’s how

  • You buy Treasury bonds from the US Treasury
  • But our Fed buys bonds from from its 21 Primary Dealers

Aside – Primary Dealers is basically a synonym for giant opaque shadow banks. Somethings Rotten in the State of Denmark” Let’s use Goldman Sachs as an example. The Fed buys these bonds from GS through its NY Fed office. William Dudley, runs the NY Fed and is also Vice Chair to Bernanke. Oh. by the way, Dudley was also chief economist for Goldman Sachs for over 20 years. Ya think, GS is getting a good deal or front running the bonds it sells to the Fed? Take a look at the recent rise in yield of the 10 year Treasury bond. (Link to chart on right side of blog)

Never forget there are puppet masters who pull the strings of the puppets we call democrat and republican politicians. But let’s get back to the bulls rigging the stock market.

  • Remember we allow our shadow banks to be giant investment brokers
  • The giant investment houses run Black Box/High Frequency Trading units.
  • Follow the money. – Is the $$$ these primary dealers are making going to finance mortgages or is it going into the stock market?

Aside – Now if you are a greedy investor, like me, scroll down toReading The Tea Leaves” which maps the course of the money as it flows into stocks and how to make $$$ from it.

  • So,  for investors. shadow banks, globalized US companies, most stocks the fix is in.
  • Good economic news – No worries thing are getting better for the economy and stocks should go higher. But shadow banks could loose a major source of revenue.
  • Bad Economic news - No worries Shadow banks, investors, globalized companies will all prosper.

You betcha, This short term fix is another bubble building. We are still the world’s economic Big Kahuna and we’re getting away with this market manipulation because we can and it works.  What were doing now should work for months. However once you turn on the steroids its hard to stop injecting. What’s really needed is fiscal reality – raising taxes/cutting social security/stop building an unsustainable military empire/cutting medicare.

Europe is taking a different road –  The Black Swan (great name) Nassim Taleb who predicted the 2008 meltdown and says that Europe is making more progress on debt than the US He’s right.  If your looking years into the future their austerity measures will work much better than what we are doing.

START Treaty (Haven’t forgot about it – Monday)

STOCKS

Investors411 tries to keep it basic.

If you don’t understand a term look in up at Investopedia.com dictionary

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

DOUBLE CHECK ALL DATA, I MAKE MORE THAN GRAMMAR MISTAKES

Index Percentage Volume
Dow +0.95% up
NASDQ +1.17% down
S&P +1.28% up
Russell 2000 +1.08% -

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Technicals, Fundamentals & Analysis

Investors411 record – 5 years of beating benchmark S&P 500

World Stocks -.

USA – Rally was confirmed yesterday and volume was relatively high,  and there’s a chance just a few people may be reentering stocks.

Job’s number for October = Rate Up to -9.8% Gain of +39,000 jobs Far Worse than expected.

Europe – Most major European markets did better than USA. The Black Swan (great name) Nassim Taleb predicted the 2008 meltdown and says that Europe is making more progress on debt than the US He’s right.

Emerging MarketsEEM (ETF for emerging markets) again outperformed US stocks. Up +1.96

———–

Chart Pattern for benchmark S&P 500 has formed a classic 8 month long cup and handle trading pattern. Stocks are accelerating to the breakout point now @ 0.50% higher (SPX at 1121 & breakout 1127) The acceleration into the breakout resistance point is OMG news for stock analysts.

When you break out to a new high and an 8 month major chart pattern is involved, it often is like adding  jet fuel to the breakout.

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Significant Shorter Term Forecasting Indexes

  • The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] The dollar fell significantly again -0.63% yesterday. Dollar was over extended to up side and two day rebound is not yet a trend = Bearish/Neutral
  • The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China, emerging markets,&  exporting countries]Rate fell slightly -+1.77%yesterday. Bearish trend has leveled off = Neutral
  • McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] rose to +5.06 Plenty of room for action up or down. = Neutral

Reading The Tea Leaves -

Bulls Rule – Today the employment numbers will probably show solid improvement. This will probably rally the dollar, and the dollar moving higher might hurt stocks. If it show an unexpected rise – the same thing will happen.

It’s the dollar/stock relationship that is key. One mantra of Investors411 has been a reminder that High Frequency Traders dominate/make 50% to 80% of all trades. They trade in both the larger currency markets and smaller stock markets.  Dollar up = Stocks down and visa versa. Here’s why the bulls are in control

  • For 8 trading days the dollar went up (one was flat) Most of these days were significant moves higher.
  • For those same 8 trading days stocks did NOT move down but sideways
  • For two days the dollar have now fallen significantly and stocks have rallied significantly

Basically, the trend is stocks move sideways on bad dollar news and rally on good news.  There are some fundamentals behind this that have been mentioned in the past and will go over on weekend or Monday. But the important part is that bulls sure look like they are in charge.

Additional pointsBDI seems to be showing early indications of a reversal in trend and that’s good news.  MO at +5 gives us lots of room to move higher. Rough interday gauge for MO is 100 Dow points are worth about 20 points. So Dow goes down 100 points MO would interday be at about -15. Reality the McClellan Oscillator has little to do with the Dow

Positions

The  Positions Section link to latest & former buys and sells  - These are positions I actually own

(I do manage 6 accounts that have other positions).

Current ETF Positions. These are, hopefully,  longer term positions

  • EEM - (Emerging Markets ETF)
  • UWM – (2x small cap stocks ETF) As mentioned yesterday sold 1/2 of UWM at 39.11 for +9% gain
  • UCO – (2X oil ETF) Bought at 11.37

Plan to  buy the dip today starting with UWM and on a huge dip TYH.

Look for Paul R’s always enlightening remarks on stocks and sectors in the comments section of the blog. See POSITION section of blog for lists of potential stocks & ETF’s including “YOUR Stock List.” -

I’d add to positions on YOUR Stock List too. Unfortunately many stocks are overbought (or close to it) right now. Paul R has a good grasp on individual stock positions.

Longer Term Outlook - CAUTIOUSLY BULLISH

AS ALWAYS, DO YOUR OWN RESEARCH BEFORE INVESTING!

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