SPX Daily Chart Shows the 'Draghi and Bernanke Puts' that Destroy Free Markets

The broad indexes bottomed in early June. The May selloff was sharp and swift.  Positive divergence and oversold conditions created the bounce as June trading began. The sideways channel in late June and July already showed the rally to be losing strength; a failure at the 1330 support level would send markets far lower. On 7/26/12, the ECB's (European Central Bank) Draghi said he would support the euro by all means necessary and do 'whatever it takes'. Bingo. The non-free markets jump higher on the news since the central bankster puppet masters decided to goose the stock market with Draghi's words. At the ECB regular monthly meeting on 9/6/12 Draghi announced the actual bond-buying OMT (Outright Monetary Transactions) program. Again, look at the reaction of the non-free markets catapulting from 1403 to over 1430 in a heartbeat. Then the Fed announces QE3 Infinity that rocket launches the non-free markets from the 1430's to the intraday high for the entire year thus far at 1476.

As a long-time believer in free markets, the central bankster intervention is truly a remarkably depressing and saddening commentary on the current stock market, the now non-free markets. Obviously the markets are goosed by central banksters from 1330 to 1400 then 1400 to 1430 then 1430 to 1476. The 150-handle fabricated move is enough to make good ole Keystone phsyically ill. Not from the stand point of profit and loss, since the money-making was easy via Keystone's algorithm, Keybot the Quant, but rather from the standpoint as to how the markets are being destroyed right under everyone's noses. The SPX ran 150 points higher from July on pure central bankster intervention, not fundamentals. What part of that don't you understand?

On 7/26/12, Draghi intervened creating a floor in the markets since the banksters knew that the failure at 1330 was lights out.  We will visit this area again in the coming weeks, destiny dictates that it should occur.  Focusing on the last two moves, the second and higher Draghi put under the market is at the critical 1403 that Keystone has been harping about in recent days. The Fed's put was at 1430 and that is already in the history books of failure.  How pitiful it was for Chairman Bernanke to announce days ago that a new super-duper QE Infinity-squared may be on tap?  Please cut us all a break. Bernanke already shot his entire load, there is no more ammo. Since Bernake's put failed six days ago, traders are now setting their sights on the Draghi put at 1403. Are you beginning to see why all the drama is occurring at the low 1400's?

In a nutshell, the OMT program promises agressive bond purchases but the action can only begin if the troubled nation (Spain) requests a bailout.  The troubled nation must request a bailout since this is the same as going hat-in-hand to ask someone for money; you fully expect that strings will be attached (conditionality). Like the lazy son or brother-in-law that wants to drink beerski's all day while playing video games. You hate to see Sis cry so you provide the dough to help them out but you expect some positive action in return. Promises are made to change ways but we all know how it always ends.

When the ECB developed the OMT program, a request by Spain for a bailout was a given, everyone thought that would occur to open the door for bond purchases. Alas, Rajoy, with Spain elections now ongoing, decides things are looking a bit better so he will hold off for a while.  This Spain bailout situation has been a major market mover, perhaps the major market mover for the last two months. The markets are stuck at SPX 1403 because this represents the Draghi put.  If Spain requests a bailout this week, traders will send the SPX higher immediately, but, as Spain continues to delay, and the request may not actually come until well into November, traders are deciding if they should allow the Draghi put at 1403 to remain in place until the Spain bailout request occurs, or not.

In fact, the move off the top over the last couple weeks is a sign that traders are giving up hope in waiting for Spain to act.  The day-to-day circle jerk of one day Spain imminently requesting the bailout but the next day saying it will be November instead, has traders throwing up their arms and not willing to wait any longer, hence the drama in the low 1400's. If Spain delays the bailout request for a few weeks, traders are not going to wait, the SPX will lose the Draghi put at 1403 and drop down to test 1380-ish and begin to set sight on the intial Draghi put at 1330-1340. What a mess the central banksters have created. We now live in a world of non-free markets, elevated to lofty levels with nothing but air underneath them, only supported by promises, words, and quantitative easing programs that no longer work. The theatrics are now reaching a climax and the 1403 support tells you the ending. 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.