The PPT is Back!

QE2 is winding down. The major market indices are crumbling. The banks that hold the credit default swaps that are tied to the debt that Greece cannot repay are getting a second bailout in as many years. The US indices have been on a six week losing streak. But hey! Don’t worry about it. The PPT is back!

Yes, just in time to avert a seven week down trend, the Plunge Protection Team (PPT) got busy on 6/16/2011 and 6/17/2011. The PPT is charged with putting arbitrary floors under the market. In other words, they manipulate the indices higher just when they suspect investors need a little shot of confidence. Since the PPT has usurped price discovery from investors, where do they reckon the Dow low to be? Bear in mind, they only want to manipulate price discovery on the down side.

Well, let’s take a look at the chart that I have included below. It looks like Dow 12,000 is a level that gets the PPT’s drawers knotted up. Yes, they wanted to make sure we didn’t add another losing week to the down trend and no, Dow 12,000 doesn’t have any real technical significance. It is just a big fat round number the Fed can use for psychological purposes. They want us to be confident. We are already stupid enough to allow the Fed to run our business but they want us to know they are here for us. Dow 12,000 it is!

Take a look at the chart. I used blue circles to show the obvious and methodical interference that seemed to arrest every bear attack. I used green arrows to show the classic PPT end-of-the-day rallies in the final hour of trading. Yes, trading volume grew even in the last afternoon on a Friday. Classic PPT. Just for informational purposes, I used green boxes to show when the PPT went to lunch. The indices melted like butter in June while our heroes were away, But, when they returned, they got right back to work. If an investor had money in the Dow, they made money on the PPT’s effort. But investors should not feel too smug. If they had money in the Dow Jones Greek Stock Index, their money would have appreciated 4.6% on Friday alone! Come on, people! The name of the game is to put your money where your government will manipulate it the most! All the markets are a farce and a scam driven higher by governments to keep the populace placated.

Look at the chart. Memorize the pattern. Invest with the PPT. When they go to lunch, close out positions. When they come back from lunch, it is definitely time to go to work. See - it’s simple!

06/16/11 - 06/17/11 intraday 10-minute bars SPY

Chart courtesy StockCharts.com

Disclaimer: The views discussed in this article are solely the opinion of the writer and have been presented for educational purposes. They are not meant to serve as individual investment advice and should not be taken as such. This is not a solicitation to buy or sell anything. Readers should consult their registered financial representative to determine the suitability of any investment strategies undertaken or implemented. BMF Investments, Inc. assumes no liability nor credit for any actions taken based on this article.