Friday, November 11, 2011

POMO Drives The Market

Okay, let’s be honest. The stock market is a sham and has been rendered such by the Federal Reserve. They carry on what they call the Permanent Open Market Operations (POMO) tactics to manipulate the stock market. The schedule is published on the New York Fed’s webpage. I suggest readers take note.
The so-called ‘operation twist’ is now underway as the Fed seeks to spend about $40 billion a month buying longer term maturity Treasuries and selling shorter term maturity Treasuries. They don’t want to expand their balance sheet any further than the nearly $3 trillion that they currently hold. Where, pray tell, did they get all this money? One only has to look at the mounting debt of the US Treasury to find the answer. Business is good when you don’t have to use your own money! 
In addition to operation twist, the PPT is no doubt staying very active. The October rally was fueled by the monstrous 45-minute 400 point Dow rally on October 4, 2011. But, I want to keep it simple this week. 
The chart below is the intraday, 10-minute bar, weekly chart of the Dow ending on 11/11/11. Wednesday was the only negative day as the Dow fell almost 400 points. What was the problem? Greece? Italy? General debt? Please! I think we all know that Europe has surrendered to the central bank, as did the US, and will accept any form of austerity that the central bank chooses to mandate. Yes, that includes a change of leadership meaning the heads of state that the citizens democratically elected are being replaced by heads of state implanted by the central bank. So much for democracy. So much for sovereignty. So much for freedom. At least the stock market went up! That’s all that matters to anyone, right? Anyway, what happened on Wednesday? The Fed only engaged in the selling of securities on Wednesday. Monday, Tuesday, and Thursday they were buyers. On Friday the rested I suppose so they could reload the ink jets on the money printer. But the Dow jumped 200 points higher at the open and Wednesday’s huge loss was erased in a fabulous 2-day rally. Way to go, boys!
How about next week? The Fed is again a Wednesday seller. Stand clear for that one day. The other four days are scheduled buying days. My sense is we will enjoy another fabulous rally next week and it does not matter if Italy falls in a hole or not. That’s not important. The Fed has decided that their subjects need a rally and a rally they shall instigate. Just look at the chart below for guidance. 

DJIA - Intraday 5 days ending 11/11/11, 10-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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