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The Hand That Rocks The Markets



February 10, 2011 – Comments (0)

The markets reversed early losses and surged back to the flat line. Thank the Federal Reserve and their buy programs once again. QE-2 continues to be used on a daily basis in what is called POMO.  This stands for permanent open market operations. The Federal Reserve buys treasuries from the banks and the banks take that money and infuse it into the markets. This makes it virtually impossible for the markets to fall unless a major event takes place overseas that the Federal Reserve has not planned for.  Should that event take place, if it is big enough, a flash crash is 100% on the table.  That is scary to say the least. When a market continues to grind higher, regardless of poor earnings, worries in Europe or the Middle East, and it is solely on the back of an entity propping it up, if they lose control, one shudders at what could happen.

The SPDR S&P 500 ETF (NYSE:SPY) is trading at $132.26. -0.01 on the day. The SPY mirrors the S&P 500. Earlier today, upon the open, the SPY was trading at $131.30, -0.97.  It has been a classic come back once again. Overnight, futures sold off after the UK did not raise interest rates thus strengthening the Dollar. Worries started to creep up out of Portugal again in regards to debt and earnings from many companies disappointed.

Cisco Systems, Inc. (NASDAQ:CSCO) reported earnings that Wall Street scoffed at. Margins were poor and EPS missed analysts expectations. The stock is trading at $19.17, -2.87 (-13.02%). In addition, PepsiCo, Inc. (NYSE:PEP) reported earnings this morning. Their profits missed Wall Streets expectations. The stock is trading at $63.05, -1.37 (-2.13%). Other stocks reported poor earnings as well but have little impact on this market.  Akamai Technologies, Inc. (NASDAQ:AKAM) is getting crushed on earnings. Whole Foods Market, Inc. (NASDAQ:WFMI) is one of the few bright spots on earnings surging higher, trading at $60.75, +7.00 (+13.02%).

The bottom line is this. Regardless of poor earnings, a stronger Dollar, fear overseas in the Middle East or Europe, the markets have the hand of "god" under them.  This "hand" is known as the Federal Reserve. The only way this market is going to see a major decline is if something happens to shock massive selling volume in the markets. Should that happen, that and only that will be enough to over power the buy programs by the Federal Reserve and their minions, the big banks.

Gareth Soloway

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