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Stock Market Manipulation At Its Finest

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October 18, 2011 – Comments (2) | RELATED TICKERS: IBM , AAPL , BAC

Stocks have reversed off early losses to surge higher. The S&P 500 is trading at 1212. The move up has come in the face of poor earnings from International Business Machines Corp. (NYSE:IBM)  which sent the stock to $177.44, -9.15 (-4.90%). Poor earnings from IBM only kept the markets down for a fraction of the day. This morning, reports from bank stocks like Goldman Sachs Group, Inc. (NYSE:GS) and Bank of America Corp (NYSE:BAC) gave a brighter outlook. Earnings have been mixed but a major key remains the same and will likely keep this market from collapsing in the near future.

There are two parts to the upside we have seen lately. As long as part one holds, part two will push the markets higher. The first part is light volume. Over the last week, the volume has dried up significantly in the markets. This means a large buyer in the markets can have a much bigger impact. That buyer is clearly the Federal Reserve. Operation Twist is in full swing and is essentially QE3. This plan by the Federal Reserve is to buy $400 billion in long term treasuries while selling $400 billion in short term treasuries. Short term is something there is demand for and investors will gobble up (due to fear), while long term has more hesitation. Throughout October, the Federal Reserve will be buying $40 billion in long term treasuries. This happens on an almost daily basis and was seen during QE2. During QE2 the term used was POMO (permanent open market operations). In other words, the Federal Reserve would use POMO to prop up the stock market.  Considering the light volume, this works like a charm. Should volume get heavy, it will have little effect.

POMO is back in full force. While Europe tries to sort out its issues and get a plan together, the Federal Reserve is keeping the markets from collapsing. Note the POMO schedule below. This clearly shows there was no POMO yesterday, the markets fell sharply. Today, the markets opened lower but mysteriously surged to go positive between 10-10:30am ET. There is POMO today as seen below. Follow this schedule and discover why in light volume, the markets can continue to go higher.

Gareth Soloway
InTheMoneyStocks.com

2 Comments – Post Your Own

#1) On October 18, 2011 at 4:01 PM, Teacherman1 (28.84) wrote:

At last, news I can use. Will watch to see if your hypothesis is correct.

Had a hard time actually finding it on your site, since I was looking for the "seen below" chart, and didn't know I had to click on your same post again, on your web site.

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#2) On October 18, 2011 at 10:33 PM, walt373 (99.86) wrote:

I am not making the connection - how does the Fed buying long-term treasuries push the stock market higher? Seeing as how long-term treasuries seem to move inversely with the stock market, I would say it's unlikely that cash received by sellers of long treasuries would go chasing stocks as replacements.

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