Thursday, November 14, 2013

SPX 10-Minute Chart Illustrates Fed-Controlled Markets

Equities had stumbled sideways through SPX 1745-1775 for the last month until the Yellen dove rally yesterday afternoon which now cascades across Asia (Nikkei up +2% and Shanghai +0.6%) and Europe (up +1% across the board). Market bears will have to reverse the SPX under 1775 to save the day today, otherwise, the bulls will confirm a breakout and new trading zone above 1775. As George Carlin would quip, "it's a big club, and you ain't in it." Nothing illustrates the insider and privileged trading better than yesterday's action. The 'chosen' are told ahead of time that Yellen's prepared comments for testimony today are dovish so they buy the market as it idles at 1766. These privileged traders are rewarded with a +0.5% gain in the afternoon, no different than betting on a football game where you already know the ending.

The Fed is the markets. The Fed and BOJ money-printing is the main driver of all the broad market gains this year. Makes you wonder just how much artificial fluff exists underneath the markets since the central banker intervention is ongoing for nearly 5 years. Markets trade flat this week awaiting the Yellen drama on tap today just like the trading that would occur ahead of any regularly-scheduled Fed meeting. Before Tuesday's open, Fisher says QE will not go on forever. His words create initial market weakness but are less meaningful these days since he used to be a hawk but now flaps dove wings. Lockhart says QE may begin as early as next month which creates a drop in equities. The Fed cannot tolerate a down market since their main mission has now morphed into keeping the stock market elevated at all costs, and they do, sending Kocherlakota to the microphone to tell everyone there is no QE tapering in sight. The Fed continues to make all their wealthy friends wealthier.

Markets begin yesterday on the sell side due to the weak futures overnight and stabilize sideways at SPX 1766 waiting on Yellen today. The privileged and insider traders receive the word that Yellen's comments are dovish so they buy the market long at lunch time while others are scratching their heads as the afternoon moves along watching the market melt-up. The rumor of Yellen's comments are universally known by the closing bell but by then the 16-point rally move is already over. After the closing bell, Yellen's comments are released and are dovish just as the insiders were told ahead of time. The Fed is the markets. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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