Something Fishy With This Market?

Discussion in 'Trading' started by Minime, Oct 17, 2002.

  1. Minime


    I know we were severely oversold until the recent rebound, but doesn't this market look a little artificial? We sell off on the S&P below a critical support point (875), and all of a sudden a wave of buyers come in and drive the market up without stopping. We then get all these after hour pops that won't go back down, but won't go up either. It seems like someone has an invisible hand propping it up, waiting for suckers to come in and buy. All this and the elections coming up soon, makes you wonder if things aren't as they seem.

    Just wanted to see peoples opinions.
  2. NKNY


    I actually agree with you...but I was getting this feeling when we were testing the lows last week before the rally...I felt pressure to the downside was real but as you say...the "HAND" kept propping up the market every time it broke to new lows and it felt artificial...I really felt it the day Bush spoke prime time...think it was a mon. Also felt it the fri before...

    I chat with a couple of buddies during the day and the funny thing is "invisible hand "was my exact term those couple of days...

  3. All I know is that apparently I have picked the wrong week to begin trading.
  4. Tony Orlando is responsible, as he has just recently begun a comeback tour.
  5. Yes it seems fishey, but take a look at a weekly chart of nasdaq, for about four years back, and this bull run that we have been having for past 6 or so days, looks kind of miniscule.

    The invisible hand doesn't look so strong on the larger timeframe.
  6. ddefina


    This is a couple months old, but shows there is such a thing as the "PPT."

    Interesting excerpt from

    ...The Fed PPT we referred to Friday is the "Plunge Protection Team". We wrote about the PPT a few weeks ago in this column. For those who missed it, the PPT actually does exist, although its proper name is the Working Group on Financial Markets. It is headed by the Secretary of the Treasury and counts the Fed chairman as one of its members. The theory is that the PPT acts to prevent large declines in the stock market by buying S&P 500 futures at critical times. Here's how the PPT attempted to put a floor under the market last week.

    On Monday, the PPT entered the S&P pit and bought some 10,000 contracts at 880, thereby making a $2.2 bln bet against prices declining below that level. They had to put up 25% or $550 mln to make that bet. They placed additional orders on Wednesday at 900 to defend the 880 level. The S&P's traded as high as 929.50 Wednesday morning before settling at 905 at the close. On Thursday, the market meandered between 907 and 895 for most of the session before finally succumbing to heavy selling at the end of the day, closing at 875.50 and below the PPT 880 floor level. That set up the potential for a steep decline Friday, since any serious buying pressure was no longer present. The PPT hedge may have worked if liquidity had been increasing. The Fed can increase liquidity by issuing what is called a coupon pass, which in effect adds permanent reserves to the system. But liquidity has been decreasing due to the fact that mutual funds are being forced to sell stocks to meet redemptions from investors wanting to get out. We estimate the PPT lost at least $90 mln with this little failed ruse. Our tax dollars at work.

    Government attempts to manipulate free capital markets have never been a good idea. It seemed to work during the go-go '90's, at least that's what we were led to believe. Every time President Clinton got into trouble, Treasury Secretary Rubin and the PPT stepped in to buoy up a normally self-correcting free market. The heady gains of the late 90's leading to the biggest stock market bubble in history helped keep Mr Clinton in office. "It's the economy, stupid" was more than just a campaign slogan. Should we be surprised to find out now that a few corporate executives decided it was OK to break the rules? Just don't get caught, and if you do get caught, stonewall. Our last president set the example. Unfortunately, the consequences of such morally corrupt behavior may haunt us for many years to come...
  7. ddefina


    “…I had a conversation with a very worried Fed official
    back on Sept. 17, the day the stock markets reopened in
    the U.S. following the Trade Center attacks. He was
    bothered by the market's apparent lack of interest in
    the Fed's rate cut that morning.
    Our discussion moved on to the fact that the Fed could
    easily intervene in the market by purchasing stock index
    futures contracts. That's an inexpensive and apparently
    foolproof way of rigging the market without leaving a

    “…Even so, there is reason to believe that the U.S. government may be loosely in
    cahoots with some top Wall Street firms to ensure that the stock market does not
    spook investors too badly, or too often. Now this does not necessarily mean, as
    some market-watchers now assert matter-of-factly, that there is a Plunge
    Protection Team which snaps into action whenever some crisis manager
    monitoring the market's vital signs on CNBC lifts a red phone at the White House.
    To begin with, who could run an operation like that? …“

    “…A few analysts believe that this form of market rigging is already going on in America, quietly, using a $40 billion (£24 billion) slush fund, known as the Exchange Stabilisation Fund, under the direct control of the Treasury Secretary. It was this fund that was used to bail out Mexico in 1995 when the US Congress was refusing to appropriate enough money…”

    Remarks by Chairman Alan Greenspan
    At the Catholic University Leuven, Leuven, Belgium
    January 14, 1997

    “…Only a central bank, with its unlimited power to create money, can with a high probability thwart such a process before it becomes destructive. Hence, central banks will of necessity be drawn into becoming lenders of last resort. But implicit in the existence of such a role is that there will be some sort of allocation between the public and private sectors of the burden of risk of extreme outcomes. Thus, central banks are led to provide what essentially amounts to catastrophic financial insurance coverage. Such a public subsidy should be reserved for only the rarest of disasters. If the owners or managers of private financial institutions were to anticipate being propped up frequently by government support, it would only encourage reckless and irresponsible practices…”
  8. I think most of us would agree that it is "fishy"...As I outlined in another post a few of the possible causes, I also feel that seasonally this is just as volatile a time as can be expected...Somehow, I often really forget the effect that these earnings announcements can have on the markets, since they are always 3 months apart...But when you combine critical, heavily index weighted component stock earnings announcements with an options expiration, its a volatile combination...

    As far as the "Republican Rally" theory...I kind of felt the same way past few days...
  9. You guys really are paranoid now. Of course it was awfully convenient that the S&P reversed right at the prior July low. But the PPT? Come on. And do you really think they would be so careless that obscure websites could confidently report the PPT bought 10,000 cars?

    A more likely theory is that a couple of big mutual funds were desperate to save their year. They see a dead obvious technical level, perhaps have advance word that some key earnings reports will be good, they know the whole world is seriously short and will cover on momentum, so they go for it. Remember the infamous "Short Busters", lead by FiDo.

    But if you want to make this PPT story believable, I suggest you link it to SEC agreeing to go easy on investment banks in exchange for them running up the market into the election. We know Pitt met with Goldman a couple of weeks ago. Hey, is that a black helicopter outside my window?
  10. Sanity


    while we will have a pop at the open b/c of MSFT, there is quite a good chance that the market will end lower. Everything is very over bought, and I think those with in the money calls will use this chance to sell at the highs. Economic reports have been overlooked, as has a potential developing problem in N. Korea. After Asia stops copying wall st, they are sure to notice the potential event risk. While MSFT #s were impressive, most overlooked the fact that the forth 1/4 guide was actually lower than first call. PC sales are not rising, and there still is a market slowdown in the chip sector. If the market pops, and then trades lower following earnings release of big names, what does that say for the direction of the market, now that the majority of big names have reported? everybody is buying into this, just like the pros would planned. Dow 8300-8600 will be the high for the next 3 months. even if tomorrow is an up day, the next 2 weeks will re-establish the market down trend.
    #10     Oct 17, 2002