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
Next Tory Leader, Prime Minister Forecast and Betting Market Odds - 18th Nov 18
The Fed's Misleading Money Supply Measures - 17th Nov 18
Stock Market Outlook: Why the Economy is Bullish for Stocks Going into 2019 - 17th Nov 18
NO DEAL HARD BrExit Tory Chaos, Theresa May Leadership Challenge - 17th Nov 18
Gold vs Several Key Investments - 17th Nov 18
GDX Gold Mining Stocks Q3 18 Fundamentals - 17th Nov 18
Is Gold Under or Overpriced? - 17th Nov 18
Active Managers are Bearish on Stocks. A Bullish Contrarian Sign - 16th Nov 18
Will The Fed Sacrifice Retirement Portfolio Values For The "Common Good"? - 16th Nov 18
BrExit War - Tory Party About to Replace Theresa May for NO DEAL BrExit - 16th Nov 18
Aspire Global Makes Significant Financial Strides - 16th Nov 18
Gold Oil and Commodities …Back to the Future ? - 16th Nov 18
Will Oil Price Crash Lead to “Contagion” for the U.S. Stock Market? - 15th Nov 18
How NOT to Be Among the MANY Stock Investors Fooled by This Market Myth - 15th Nov 18
Tory BrExit Chaos Cripples UK Economy, Wrecks Housing Market Confidence - 15th Nov 18
Stocks Could End 2018 With A Dramatic Rally - 15th Nov 18
What Could Be the Last Nail in This Stock Bull Markets Coffin - 15th Nov 18
Defensive Stock Sectors Outperforming, Just Like During the Dot-com Bubble - 15th Nov 18
Buying Your First Home? Here’s How to Save Money - 15th Nov 18
US Economy Ten Points or Ten Miles to ‘Bridge Out’? - 14th Nov 18
US Stocks: Whither from Here? - 14th Nov 18
Know exactly when to Enter&Exit trades using this... - 14th Nov 18
Understanding the Benefits of Keeping a Trading Journal - 14th Nov 18
S&P 500 Below 2,800 Again, New Downtrend or Just Correction? - 13th Nov 18
Warning: Precious Metals’ Gold and Silver Prices are about to Collapse! - 13th Nov 18
Why the End of the Longest Crude Oil Bull Market Since 2008? - 13th Nov 18
Stock Market Counter-trend Rally Reaches .618 Retracement - 13th Nov 18
How to Create the Best Website Content and Generate Organic Traffic - 13th Nov 18
Why the Stock Market Will Pullback, Rally, and Roll Into a Bear Market - 13th Nov 18
Stock Markets Around the World are Crashing. What Not to Worry About? - 12th Nov 18
Cyclical Commodities Continue to Weaken, Gold Moves in Relation - 12th Nov 18
Olympus Tough TG-5 Camera Stuck or Dead Pixels, Rubbish Video Auto Focus - 12th Nov 18
5 Things That Precede Gold Price Major Bottoms - 12th Nov 18
Big US Stocks Q3 Fundamentals - 12th Nov 18
How "Free Money" Helped Create Sizzling Housing Market & REIT Gains - 12th Nov 18
One Direction More Likely for Bitcoin Price - 12th Nov 18
The Place of HSE Software in Today's Business - 12th Nov 18
Gold Asks: Are US Bonds Overvalued? - 11th Nov 18
Why the Stock Market Will Pullback Before Heading Higher - 11th Nov 18
GDX - Will you Buy This Hated Stock with Me? - 11th Nov 18
Christmas and Halloween LED Dynamic Projector Light Review - 11th Nov 18
Wall Street Veteran: Why I Don’t Lend to Family and Friends - 10th Nov 18
Stocks Breaking Higher, but Resistance Ahead - 10th Nov 18
Stock Market Was Supposed to “Crash Like 1987” - 10th Nov 18
SPX : The Incredibull Stock Market Plays On - 9th Nov 18
USD/CAD – The Moment of Truth Is Coming - 9th Nov 18
Is the Stock Market’s Rally “All Good To Go”? - 8th Nov 18
End in Sight for 'Unloved' Silver - 8th Nov 18
Outlook for Gold & Silver Precious Metals Sector is 'Positive' - 8th Nov 18
A Great Day for Metals as Platinum Price Breaks Out - 8th Nov 18
Future US Interest Rates, Financial Markets, and the FED - 8th Nov 18
Buying an Approved Used Land Rover From a Dealer - What You Need to Know! - 8th Nov 18

Market Oracle FREE Newsletter

Free Online Trading Session

On the Stock Market the Federal Reserve Impersonates Dikembe Mutombo!

Stock-Markets / Stock Markets 2018 Apr 04, 2018 - 06:48 PM GMT

By: Barry_M_Ferguson

Stock-Markets

NBA fans will remember Dikembe Mutombo as the former defensive-minded center who carved his niche in the league by blocking shots. Upon swatting a shot away, Dikembe would shake his head ‘no’ and wag his forefinger back in forth at his opponent as admonishment for even attempting a shot near his presence.


See the first chart below.



 
DJIA - Daily since January 2018
Chart courtesy StockCharts.com

This basically shows us the winning, rising unabated pattern of the DJIA since President Trump was elected. With a steady rise in stock prices, the Fed and their PPT arm has been quite. No need for intervention. Besides, the Fed has been buying ‘assets’ (stocks) like all the other central banks. They announced an end to this policy at the end of 2017. Stock price enjoyed another bubblicious month in January and then there was a pin prick. The Fed raised the Fed Funds rate and promised more. The yield curve compressed more and investors sold down the stock indices. I have marked the ‘Dikembe Mutombo Line’ in green.

Well, the Fed let the selling go on until the Dow pierced the 24,000 level. Then, Fed Chief Powell jumped out and swatted the selloff snowball back up the hill. He wagged his finger at would-be sellers as if to say, “Don’t even try it!!”

February was a busy month for the Fed as another wave of selling hit the Dow. This time, the selloff did not even make it to the ‘Dikembe Mutombo Line’. The selling was abruptly blocked and back up went the Dow. The forefinger was again wagging.

You could almost hear them on Wall Street. “On Comet! On Cupid! On Donner and Blitzen!” Wait a minute, that was a different ‘Santa Claus’. The point is that everyone is so enamored with an ever-rising stock index value that no one seems to care that the Federal Reserve constantly forces stock prices higher at arbitrary levels. True capitalism cannot function with constant Fed meddling. True prices for anything cannot be discovered with constant Fed meddling. A fair economy cannot ever be realized with constant Fed meddling. Capitalism this is not!!

Yet, another bout of selling hit the Dow as the calendar turned to April. Another sign that the Fed is active in stock pricing is when a month is about to expire with steep losses, like February of 2018, the PPT instigates a massive ‘last day of the month rally’. Invariably, this leads to a beginning of the month, April, selloff.

See the next chart below. It is a picture of the Dow for the past two days (Monday 4/2/18 and Tuesday 4/3/18 in 5-minute bars).

DJIA - 4/2/18 - 4/3/18 5-minute bars
Chart courtesy StockCharts.com

This 2-day chart shows the PPT in action. Monday was the first day of the month following the PPT’s nice ‘end of the month rally’ in March. Naturally, stock prices plunged. Down 700 points or so with only a few hours left in the trading day, stock indices suddenly sprang to life! With so little time to work a miracle rally, the PPT did spur on a nice 300-point rally in the last 30 minutes of trading! Again, I have drawn the ‘Dikembe Mutombo Line’ in green along the Dow 24,000 level. This is the Fed’s target for setting stock prices.

Tuesday was very wild. There were a couple of intraday 200-point selloffs immediately followed by 300-point rallies culminating in the nice 300-point rally at 3 PM. That brought the Dow to what level again? Yes, 24,000. Dikembe was again wagging his finger. So, it only took the Fed’s PPT less than 6 hours of trading time to basically erase a 700-point selloff. Whew!

One quick point. With all that wild action, one would think a so-called ‘volatility index’ like the VIX would rise. It didn’t. It fell. So again, the VIX pricing has nothing whatsoever to do with rapidly rising or falling stock prices. It is priced from the value of put options. The Fed, the PPT, drives up stock prices using call options in massive waves thus killing the value of puts thus killing the VIX.

What’s so special about Dow 24,000? I have no idea. But this is the only thing investors need to know. The Fed runs everything. America does not have a stock ‘market’. America does not enjoy pure capitalism. The Federal Reserve is constantly setting prices. What investors have to look for is a sign from the Fed that they are impersonating Dikembe Mutombo to reject any selling attempt on the part of investors so that the Dow pricing will conform to the level the Fed feels comfortable. My guess is the Fed will always step in when selling looks poised to tank the derivative market. They steal tax money from the citizens, drive up stock prices, and their bankster friends get rich. Welcome to America!

A follow-up. I literally cannot write this fast enough. We all know that stock prices are at least ‘elevated’ (even in the Fed’s opinion). The country is fractured on many faults. US troops are in 75% of countries throughout the world killing and destroying everything in their path. For brevity, we could all agree that there are many reasons stock prices could legitimately fall. Yet, they will not be allowed to do so. On Wednesday, the Dow opened up down some 400 points below the Dikembe Mutombo Line. We all know what happens next. Enjoy the rally back above 24,000. Enjoy the american clown show!

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.

© 2018 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.


© 2005-2018 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