Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
2019’s Hottest Commodity Is About To Explode - 15th Oct 18
Keep A Proper Perspective About Stock Market Recent Move - 15th Oct 18
Is the Stocks Bull Dead? - 15th Oct 18
Stock Market Bottoms are a Process - 15th Oct 18
Fed is Doing More Than Just Raising Rates - 14th Oct 18
Stock Markets Last Cheap Sector - Gold - 14th Oct 18
Next Points for Crude Oil Bears - 13th Oct 18
Stock Market Crash: Time to Buy Stocks? - 12th Oct 18
Sheffield Best Secondary School Clusters for 2018-19 Place Applications - 12th Oct 18
Trump’s Tariffs Echo US Trade Policy That Led to the Great Depression - 12th Oct 18
US Dollar Engulfing Bearish Pattern Warns Of Dollar Weakness - 12th Oct 18
Stock Market Storm Crash, Dow Plunges to Trend Forecast! - 12th Oct 18
SP500 Stock Market Sell Off Well Forecast by President Trump - 11th Oct 18
USD and US Tr. Yields Retreat, GBP Gains on Brexit-deal Report - 11th Oct 18
Loss Of Yield Curve "Shock Absorber" Could Mean A Rough Ride Ahead For Markets & Housing - 11th Oct 18
Just How Bearish is the Stock Market’s Breadth? - 11th Oct 18
Here’s Why Gold Stocks, Gold, and Silver Are Great Buys Now - 10th Oct 18
Russian Ruble Technical Chart Analysis and Forecast - 10th Oct 18
Society Trends To Keep in Mind in the USA - 10th Oct 18
[eBook] How to Identify Turning Points in the Market - 10th Oct 18
Euro Vulnerable as Slowing Growth Reveals Underlying Issues - 9th Oct 18
Construction Companies to Watch For in 2019 - 9th Oct 18
ECB Meeting Minutes and US Inflation Data in Focus - 9th Oct 18
Interest Rate Shock-Time to Find Out Who has been Swimming Naked - 9th Oct 18
Unintended Consequences of Expanding Sheffield's Best Ranking State Secondary Schools - 9th Oct 18
Crude Oil Price Trend Forecast 2018 Update - 9th Oct 18
Inflation Is Starting To Heat Up - 8th Oct 18
Stock Market Seasonal Influence at Work - 8th Oct 18
Barrick Randgold Deal Breathes New Life into Gold - 8th Oct 18
Stock Market Sell Off, Dollar Rally Expected, Now What? - 8th Oct 18
The Chartology of Gold and Silver - 8th Oct 18
The Income for Life Playbook - 8th Oct 18

Market Oracle FREE Newsletter

Trading Any Market

Alternative Explanation For S&P500 Rally Trim-Tabs Conspiracy Theory

Stock-Markets / Market Manipulation Jan 15, 2010 - 09:32 AM GMT

By: Andrew_Butter

Stock-Markets

Best Financial Markets Analysis ArticleA recent post on Zero Hedge suggested that the “Non-Stop Rally Since March”, could have had a covert helping hand:


One way to manipulate the stock market would be for the Fed or the Treasury to buy $20 billion, plus or minus, of S&P 500 stock futures each month for a year.  Depending on margin levels, $20 billion per month would translate into at least $100 billion in notional buying power.  Given the hugely oversold market early in March, not only would a new $100 billion per month of buying power have stopped stock prices from plunging, but it would have encouraged huge amounts of sideline cash to flow into equities to absorb the $300 billion in newly printed shares that have been sold since the start of April.
 
This type of intervention could explain some of the unusual market action in recent months, with stock prices grinding higher on low volume even as companies sold huge amounts of new shares and retail investors stayed on the sidelines.

http://www.zerohedge.com/..

I have two points:

The first is that ONE thing and ONLY one thing causes a stock or an asset to go up in price, which is that there are more buyers than sellers.

So perhaps in March 2009 the sellers just said to themselves “Blow this, I’m going to go on holiday until I can get a decent price for my shares”. And perhaps they did just that. Outside of the “casino” where the players take bets that have to be covered in a certain time, no one HAS to sell a share if he doesn’t want to.

Remember, it’s not the games that the intermediaries play going long and short and buying and selling options that ultimately drives markets, it’s the end users. Sure the intermediaries can temporarily distort the market (or deliver better efficiency so that equilibrium is reached quicker – perhaps), but there are limits.

Ah you say but what about the volumes? “Those went right down, so that PROVES there was a conspiracy somewhere”.

Err…in a word, “no”!

This is a chart comparing the volume on the S&P 500 (average monthly), compared to the Index (also monthly).

The way I read that chart:

1: What happened last time was that volume increased steadily from about the “pop” until about the bottom.

2: Then in the primary rally that followed it decreased steadily, for about the same time it had previously increased steadily and in aggregate at the same rate.

3: At the end of that cycle there was a drifting sideways then a pull-back.

OK, just one precedent, I haven’t looked at other busts, but carry that “pattern” forward to today, and sure unit volumes have gone up, that’s computers for you, but the pattern is remarkably similar.

1: Volume increased steadily from about the start of the pop to the bottom [√]

2: Then it decreased steadily at about the same angle picking up the line where the trough of the volume is the same as the peak of the volume that started the pop [√].

3: Didn’t get the pull back (that everyone is dreading), but many people (including me) are anticipating a drifting sideways in 2010.

Interestingly I’m on record saying that once it hits about 1,200 the chances of a pull back are quite high, which is about where that ends up if you eyeball the previous dynamic (the purple line).

The other reasons that I don’t think the Fed gamed the market are:

(a) I really don’t think they are that smart.

(b) I certainly don’t think they are that stupid either, in spite of everything that happened.

(c) To understand precisely when the bottom was is you had to understand BubbleOmics (that predicted the “turn” at 675), and since Ben Bernanke steadfastly maintains that he can’t even spot a bubble, let alone understand it’s dynamics, even if someone bashed him over the head with a copy of International Valuation Standards,  I find it hard to believe that he recognised on 9th March that was the time to “Jump In”.

Incidentally there is a discussion about bubble dynamics at: http://www.marketoracle.co.uk/Article16461.html

By Andrew Butter

Twenty years doing market analysis and valuations for investors in the Middle East, USA, and Europe; currently writing a book about BubbleOmics. Andrew Butter is managing partner of ABMC, an investment advisory firm, based in Dubai ( hbutter@eim.ae ), that he setup in 1999, and is has been involved advising on large scale real estate investments, mainly in Dubai.

© 2010 Copyright Andrew Butter- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Andrew Butter Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules