Saturday, September 3, 2011

Theory of Market Relativity

Investing is all relative these days. Economic data is compiled by a government that enlists media shills to perpetuate a positive vibe to everything. Most of the data is contrived and unbelievable. For instance, a week ago the government said durable goods orders were up and manufacturing was declining less than expected. Why don’t we drop the ‘expected’ part because we’re all guessing now. Bernanke said the economic recovery was weaker than he expected so he is guessing like the rest of us. Manufacturing is slowing in general throughout the world. Yet, the news was spun to goose the stock market. QE3 was coming soon. Or, maybe it wasn’t. The markets rallied on the back of either interpretation. If orders for goods were up, someone forgot to tell the companies that make stuff. Their activity was down in August. So too were hours worked, real wages, and zero jobs were created. What could we possibly expect from our government - the truth?
Yeah, I know. I’ll give readers a few moments to stop laughing. 
Ready? Here is the truth. The driving force in the market right now is the client statement. Statements are generated at the beginning of every month and they reflect the markets through the end of the previous month. To keep investor psychology buoyant, it appears that the ruling elites have decided to goose the markets in the final week of every month to pretty up the statements. This has happened in every month of the year so far except for January and February and July. The markets were trading higher in the first two months of the year so there was no need to goose them. In July, the debt debate was raging in the US and the elites were probably vacationing believing that they had already won the psychological battle. The media shills were cheering everything on and the market was up for the year. 
August began and the markets began to drop. Yearly gains quickly turned to losses as Ruler Bernanke assembled his merry men of manipulation in Jackson Hole, Wyoming. They announced nothing but a willingness to visit QE efforts in September. Bad news was good news. Good news was better news. Any news was good news. Bernanke’s sock had a hole in it. Anything. Everything was good and a reason for a stock rally. Up, up, up the Dow went right up to the final trading day in August.
Client statements were printed for the month of August and what was a 14% loss was rallied back to be only a 3% loss. That makes swallowing all the horse manure about economic recovery more palatable. The books were closed and the PPT had done their job. And then, the calendar turned to September and the Dow lost some 450 points in the first two days of the new month. Where did all the good news go? Did reality suddenly set in?
No, the PPT knows that monthly statements don’ t come out for another four weeks so they take time to rest in the first few weeks of a month. Yes, the market is a complete charade run by charlatans without compunction and they use the stock market to manipulate psychology. An economy that continues to decelerate towards a stall with no ability to create jobs could be even scarier if the Dow reflected reality and dropped a quick 25% or so. Isn’t it nice that the PPT cares so much about our fragile psyches? 
Look at the chart. Let me make two points. First, we can easily see that the end of a month is the time to be in stocks and the beginning of the month is the time to be out of stocks. This is the calendarization of the market. It is the theory of market relativity. Nothing, and I mean nothing matters, except where we are in the calendar as far as owning stocks. The ruling elite are in charge of the markets and they obviously have an agenda of manipulation. 
The second point is taken from the bottom of the chart where we find the volume. Notice the sort of ‘London Bridge’ effect as the majority of volume hits the markets at the beginning and end of the trading days. Obviously the machines that do most of the trading now have a predisposition that is programmed in to push the markets in the morning or the late afternoon. When we trade should now be taken into consideration as we don’t want to be on the wrong side of the machines that rule the market.
What will the rest of September be like? My guess is we will continue the selling until Bernanke stops it with the scheduled Fed meeting mid-month. Maybe he will announce QE3 then and maybe not. It doesn’t really matter. What matters is if the Dow is down for the month going into the final week or so, there will be a rally. September is also the end of the third quarter and we all know the end of months and quarters get extra special attention from the manipulators. Yes, the market is a sham but it is a sham that can be profitable. We just have to trade with relativity.

DJIA - Past 12 days ending 9/2/11, 30-minute bars
Chart courtesy
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. Advisory services offered through BMF Investments, Inc.

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