Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Stock Market Microwavable Rallies

Stock-Markets / Stock Markets 2011 Dec 05, 2011 - 02:33 AM GMT

By: Barry_M_Ferguson

Stock-Markets

Best Financial Markets Analysis ArticleQuestion: How do you cook a stock rally?

Directions: Empty wallet into a microwavable bowl. Mix in any stock index of choice. Add a cup of central bank intervention and a cup of PPT spice. Microwave on high for five minutes. Eat immediately as spoiling will occur quickly as reality sets in.


There you have it. This is the era of microwave rallies. These rallies are cooked and not grown. They are created and not developed. They are instantaneous and not evolved. They are manufactured and not organic. How investors put money to work in stocks today is far different than yesterday. And yet, the media hasn’t quite caught on. The way the media presented it, investors enjoyed the best weekly rally last week (week ending 12/02/2011) since March of 2009. Let’s look a little closer with our magnifying glass of truth.

Since stock rallies now come to us in very short bursts of buying, the process of investing is more like cooking with a microwave oven as opposed to cooking with a conventional oven. Today’s rallies spring forth instantaneously and dissipate just as quickly. They also tend to be contrived, connived, cajoled, coerced, conjured, and concocted.

The message investors get from these microwave rallies is that investing in stocks has morphed into gambling at casinos. The gambler has no chance to win until the dealer begins dealing cards or the roulette operator spins the wheel. The dealer, operator, and casino owner are all one in the same. They are the Federal Reserve Bank.

In the past, investors bought and sold stocks in a market where prices were discovered by the participants. Today, the market is closed and the casino is open. The casino operators now determine price. As such, money is exchanged in the casino for chips that represent money. Gambling infers chance rather than skill. Gamblers risk the conversion of money to chips for a chance to collect more chips. Since all stocks, sectors, and indices now move in tandem, their values have been stripped and replaced with chips representing prices assigned by the Fed. Skills to discern value are now obsolete. Prices depend on Fed action and gamblers have to commit chips to play. As with the directions above, the gambler puts the chips in a bowl and waits for central bank manipulation and intervention to cook up a stock rally. And today, rallies are usually about 5 minutes in duration.

This past week is an example of modern investing/ gambling. For the week ending 12/02/2011, the Dow enjoyed its best week since March of ’09 with a 780 point rally. Actually, to be precise, there wasn’t so much a ‘weekly’ rally as much as a ‘day’ rally. Actually, to be more precise, there wasn’t so much a ‘day’ rally as much as a ‘minute’ rally. For a five-day trading week, there are 1,950 minutes of available minutes to buy or sell stocks on a US exchange. This past week, the Dow rallied 250 points in the first five minutes of trading on Monday morning and over 400 points in the first five minutes of trading on Wednesday. So, in truth, the 780 rally points on the Dow happened basically in 10 of the 1,950 minutes of trading. A few other micro bursts accounted for the rest of the ‘rally’. If gamblers didn’t have their chips on the table for those 10 minutes or so, they completely missed the rally. Even worse, without those prosperous 10 minutes, the Dow trended lower for the most part. And yes, these 10-minute rallies were inspired by Federal Reserve action. How does a gambler know when the Fed is about to turn all the colors on a roulette wheel to black?

Thus, the modern investor must embrace gambling as a strategy and the potential gains on the gamble are completely up to the Federal Reserve. Of course on Monday, the casino was greeted with news that central bankers were committed to bailing out Europe. That was good for 250 Dow points at the open. On Wednesday morning, the casino was greeted with the news that Ben Bernanke wore bermuda shorts to work. That was good for 400 Dow points at the open. Actually, the news was that Bernanke’s shorts were cuffed so that got everyone going. No, really there was some kind of announcement about a reduction in US dollar currency swap interest rates from 1% to .5%. Big whup! How this will serve to help the governments of the formerly sovereign nations of Greece or Italy extend and pretend their debt away I have no idea. Probably this was a move designed to free up more dollars so the big banks can add more collateral to their eroding sovereign debt credit default swap positions. And, not that the vast majority of gamblers had a clue about currency swaps, the important thing was that an announcement was made about some kind of central banker action. That just has to be good for a rally, right? Start the microwave!

The question now becomes how do gamblers profit from this new casino? There is no way that anyone can confuse the modern stock casino with a stock market. The term ‘market’ means there is a medium where buyers and sellers set prices. Clearly the central banks now conspire to set prices. They do so in microwave-like minutes of trading. We can adopt the term ‘casino’ now for several reasons. First, all stocks and all indices move in tandem. Thus, they are all simply chips that are used to get exposure to the game. There is no value in the chips. They carry a price and the owner of the casino sets the price. Second, casinos offer games of chance. No one goes to a casino to play a game of pure skill like chess, for example. But rather, casinos offer games that involve playing cards, dice, and balls that roll around a roulette wheel until they randomly fall into a red or black colored and numbered pocket. These games require very little if any skill from the player and winning is a function of chance. Third, casino operators determine winners and losers. Casino operators seek to limit gains but they also manufacture winners occasionally to induce the gamblers to keep playing. As with stocks, whenever they seem poised to fail, the central bankers make an announcement that turns the colors of the pockets on a roulette wheel to all black for a spin or two. Everyone wins!

The chart below is a picture of the Dow for the week in question on an intraday basis with 10-minute bars. We can clearly see the microwave-like bursts of buying linked to central banker action and manipulation. The extra volume at the bottom of the chart would lend credence to coordinated PPT activity. I have circled the microwave events with green and more minor microwave bursts in lighter green. Bear in mind that this chart is showing 10-minute bars but in actuality, the microwave buying was concentrated in no more than 5-minute bursts. Each burst was Fed inspired and Fed driven.

So what do we do going forward? How do we answer the question posed at the beginning of this article? Let me answer that by quoting Clint Eastwood’s Dirty Harry character. “You’ve got to ask yourself one question - Do I feel lucky?”

DJIA - Intraday 10-minute bars over 5 days week ending 12/02/2011

Chart courtesy StockCharts.com

Barry M. Ferguson, RFC
President, BMF Investments, Inc.
Primary Tel: 704.563.2960
Other Tel: 866.264.4980
Industry: Investment Advisory
barry@bmfinvest.com
www.bmfinvest.com
www.bmfinvest.blogspot.com

Barry M. Ferguson, RFC is President and founder of BMF Investments, Inc. - a fee-based Investment Advisor in Charlotte, NC. He manages several different portfolios that are designed to be market driven and actively managed. Barry shares his unique perspective through his irreverent and very popular newsletter, Barry’s Bulls, authored the book, Navigating the Mind Fields of Investing Money, lectures on investing, and contributes investment articles to various professional publications. He is a member of the International Association of Registered Financial Consultants, the International Speakers Network, and was presented with the prestigious Cato Award for Distinguished Journalism in the Field of Financial Services in 2009.

© 2011 Copyright BMF Investments, Inc. - All Rights Reserved
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.


© 2005-2019 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