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ES and the Great POMO Rally
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ES and the Great POMO Rally

  #351 (permalink)
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So, the entire POMO is nothing more than another financial game created by the Fed that has successfully manipulated the stock market higher providing an endless bid because of their liquidity injections. If this were to stop, we would see an immediate correction in prices.

Cheers,
PB

PB, what do the Fed want to achieve here by driving the stock market artificially higher? Who had they in mind to be the main beneficiary of this exercise, the banks?

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  #352 (permalink)
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PB, what do the Fed want to achieve here by driving the stock market artificially higher? Who had they in mind to be the main beneficiary of this exercise, the banks?

The over all ideology behind the POMO is to provide liquidity to the markets which in turn will drive investors to risk assets vs. non-risk assets (Treasuries being the benchmark for risk, i.e. risk-free returns). The beneficiaries of a higher stock market per the Bernank's quote, "will give equity investors the feel and comfort of their portfolios and net worth rising in value". Meanwhile, the currency in which the benchmark stock market is denominated in has been losing value since POMO began.

So, the proposed beneficiaries of the POMO are equity investors but in reality, the Primary Dealer Banks have benefited from this far beyond any investor. I know the media makes a spectacle about how this is only benefiting the top 1% of the population but in reality, many HNW investors only have a small portion of their portfolio's invested in a traditional buy and hold equity structure. Every wealthy individual investor I know only has a small percentage of their portfolio in equities. These people are already rich and not trying to take on more risk to get way richer. The majority are in the wealth preservation mode of their assets in these uncertain times. This means they are in high grade fixed income securities (if that really exists anymore) and Real assets such as precious metals, numismatics, high end art, real estate such as timberland, farmland (Corn, Wheat, Cotton, etc.) and minerals/energy (not so much in residential or CRE) with some exposure to hedge funds (FoF's), private equity and things along those lines that are not as traditional and feasible to the "Joe Retail" investor. I don't know one HNW investor that has their entire net-worth in equities that hasn't hedged it in some way via a derivative strategy i.e. pre-paid forward which is irrelevant to what the market does as they've taken a majority of that value of those assets and reinvested it in a safer investment structure.

So, to be specific, POMO is just another way to keep the primary dealer banks running as traditional trading fees and underwriting fees have fallen off a cliff without it.

Cheers,
PB

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  #353 (permalink)
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Nice sell off today partially from the news of the Standard & Poors downgrade outlook for the U.S. to negative with a few other earnings issues such as Citi's loss of earnings and continued concerns in Europe. To me, I'm seeing a pattern taking place here. Back in March 7th, 8th and 9th, I started selling into retracements on the ES with an effort to establish a net short position while cycling in some profits. The levels I started selling into were 1318.25 and then on down against other retracements. This move ended up running all the way down to the 100 day MA on the daily chart interval.

Today and this past Friday, I noticed the same thing has been happening with with the 1318 level. It appears that there are definitely some short sellers coming into the market and selling this level. I've attached two images of what I'm looking at from March and from now. Also, If you look on the daily chart, we are nose diving back down with the MACD about to drop back below the zero line. Maybe this time, the move will be for real and we are on the precipice of a major correction in the markets. I'll be watching this closely and will be looking to start establishing a net short position.

Cheers,
PB

Attached Thumbnails
ES and the Great POMO Rally-es-06-11-15-min-3_10_2011-fibs.jpg   ES and the Great POMO Rally-es-06-11-15-min-4_18_2011-fibs.jpg   ES and the Great POMO Rally-es-06-11-daily-4_21_2010-4_19_2011-daily.jpg  
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  #354 (permalink)
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Couple of weeks of Value Area for the ES as well as last month Value area. Obviously, we are trading within last month value which technically speaking explains the selling at 1318 from an auction point of view.

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Why Listen to S&P on US Debt? | The Big Picture


Why Listen to S&P on US Debt?
By Barry Ritholtz - April 18th, 2011, 11:10AM

There is an old Wall Street joke about analysts: “You don’t need them in a Bull Market, and you don’t want them in a Bear Market.”

Which brings me to Standard & Poor’s. They put a “negative” outlook on the U.S. AAA credit rating, citing rising budget deficits and debt.

To which I say “Who Cares?”

Its not that I disagree with their assessment — I do not — but I pay it little heed. It was much more important to me as an investor that PIMCO’s Bill Gross was out of Treasuries a month ago (and indeed, is short) than what S&P says. That was all any bond investor needed to know — no ratings agency necessary.

If ever there was an organization more corrupt, incompetent, and less capable of issuing an intelligent analysis on debt than S&P, I am unaware of them. Why do I write this? A huge part of the reason the US is in its awful financial position is due to the fine work of S&P.

Consider what Nobel Laurelate Joseph Stiglitz, economics professor at Columbia University in New York observed:

“I view the ratings agencies as one of the key culprits. They were the party that performed that alchemy that converted the securities from F-rated to A-rated. The banks could not have done what they did without the complicity of the ratings agencies.”

Hence, the “negative outlook” of US debt has come about because the inability of Standard & Poor’s to have performed their jobs rating mortgage backed securities. Ultimately, this enabled the entire crisis, financial collapse, enormous budget deficit and now political over the debt ceiling.

Of course there is a negative future outlook. Its in large part the work product of S&P and Moody’s.

Why we even have Nationally Recognized Statistical Rating Organization (NRSRO) any longer following their payola =driven corruption, their gross incompetency and their inability to discharge their basic duties is beyond my understanding.

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  #356 (permalink)
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Lornz View Post
Why Listen to S&P on US Debt? | The Big Picture


Why Listen to S&P on US Debt?
By Barry Ritholtz - April 18th, 2011, 11:10AM

There is an old Wall Street joke about analysts: “You don’t need them in a Bull Market, and you don’t want them in a Bear Market.”

Which brings me to Standard & Poor’s. They put a “negative” outlook on the U.S. AAA credit rating, citing rising budget deficits and debt.

To which I say “Who Cares?”

Its not that I disagree with their assessment — I do not — but I pay it little heed. It was much more important to me as an investor that PIMCO’s Bill Gross was out of Treasuries a month ago (and indeed, is short) than what S&P says. That was all any bond investor needed to know — no ratings agency necessary.

If ever there was an organization more corrupt, incompetent, and less capable of issuing an intelligent analysis on debt than S&P, I am unaware of them. Why do I write this? A huge part of the reason the US is in its awful financial position is due to the fine work of S&P.

Consider what Nobel Laurelate Joseph Stiglitz, economics professor at Columbia University in New York observed:

“I view the ratings agencies as one of the key culprits. They were the party that performed that alchemy that converted the securities from F-rated to A-rated. The banks could not have done what they did without the complicity of the ratings agencies.”

Hence, the “negative outlook” of US debt has come about because the inability of Standard & Poor’s to have performed their jobs rating mortgage backed securities. Ultimately, this enabled the entire crisis, financial collapse, enormous budget deficit and now political over the debt ceiling.

Of course there is a negative future outlook. Its in large part the work product of S&P and Moody’s.

Why we even have Nationally Recognized Statistical Rating Organization (NRSRO) any longer following their payola =driven corruption, their gross incompetency and their inability to discharge their basic duties is beyond my understanding.

I agree with Barry on this one. The "Ratings Cartel" should have been dismantled after their failure to properly react to the Bank failures/Credit Crisis that they somehow missed interpreted underlying securities in the different CDO tranches. Lol! Why would anyone take these clowns seriously any more. The best part is Moody's comes out with a positive outlook for the U.S:

"Last Wednesday, President Obama outlined a revised proposal only two months after his administration presented its 2012 budget, a very unusual move that followed an alternative Republican budget presented by US Rep. Paul Ryan of Wisconsin the previous week and passed by the House of Representatives last Friday. While the politics surrounding an agreement remain contentious, we believe these two proposals together represent a significant shift in the US fiscal debate, as both would result in lower deficits and debt levels than projected in the February budget. This potential change in the direction of fiscal policy is credit positive for the US federal government (Aaa stable), although it remains uncertain what sort of budget will actually be adopted. The US stands out from other major countries as not yet having a plan for reversing its upward debt trajectory."

I'm pretty sure everyone knows by now that the U.S. is in a tight spot and the Fed is all in throwing everything they can to extend and pretend and it's results are deteriorating. I also agree that the fact that Bill Gross is all out of Treasuries is enough said.

Cheers,
PB

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  #357 (permalink)
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Private Banker View Post
I agree with Barry on this one. The "Ratings Cartel" should have been dismantled after their failure to properly react to the Bank failures/Credit Crisis that they somehow missed interpreted underlying securities in the different CDO tranches. Lol! Why would anyone take these clowns seriously any more. The best part is Moody's comes out with a positive outlook for the U.S:

"Last Wednesday, President Obama outlined a revised proposal only two months after his administration presented its 2012 budget, a very unusual move that followed an alternative Republican budget presented by US Rep. Paul Ryan of Wisconsin the previous week and passed by the House of Representatives last Friday. While the politics surrounding an agreement remain contentious, we believe these two proposals together represent a significant shift in the US fiscal debate, as both would result in lower deficits and debt levels than projected in the February budget. This potential change in the direction of fiscal policy is credit positive for the US federal government (Aaa stable), although it remains uncertain what sort of budget will actually be adopted. The US stands out from other major countries as not yet having a plan for reversing its upward debt trajectory."

I'm pretty sure everyone knows by now that the U.S. is in a tight spot and the Fed is all in throwing everything they can to extend and pretend and it's results are deteriorating. I also agree that the fact that Bill Gross is all out of Treasuries is enough said.

Cheers,
PB

It's a circus. It's hard to take anything seriously these days, the whole situation is absurd. I learnt a long time ago that the markets can stay irrational longer than I can remain solvent (Keynes), and so I try to stick to trading what I see, not what I believe will happen. Nevertheless, the next few years will be very interesting. Who knows, maybe this is the start of the next big bull market. Aided by QE 3 - 50. It seems all economical theories are defunct at this point. I honestly don't know what to believe anymore...

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  #358 (permalink)
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Private Banker View Post
Nice sell off today partially from the news of the Standard & Poors downgrade outlook for the U.S. to negative with a few other earnings issues such as Citi's loss of earnings and continued concerns in Europe. To me, I'm seeing a pattern taking place here. Back in March 7th, 8th and 9th, I started selling into retracements on the ES with an effort to establish a net short position while cycling in some profits. The levels I started selling into were 1318.25 and then on down against other retracements. This move ended up running all the way down to the 100 day MA on the daily chart interval.

Today and this past Friday, I noticed the same thing has been happening with with the 1318 level. It appears that there are definitely some short sellers coming into the market and selling this level. I've attached two images of what I'm looking at from March and from now. Also, If you look on the daily chart, we are nose diving back down with the MACD about to drop back below the zero line. Maybe this time, the move will be for real and we are on the precipice of a major correction in the markets. I'll be watching this closely and will be looking to start establishing a net short position.

Cheers,
PB

I shorted as well opened my position @ 1316 with a stop @ 1318.25 went to sleep woke up and closed at 1309. Im still trading on my sim but will go live in the next weeks or so. I still think the key level here is 1400, I can see another correction but not in a major way. It looks like the /ES created a double top with the highs @1336 I can see a sell off to 1241-1243 coming back to the lows it made back in March 17. It looks like it will touch the 200 day mva for a last push up. The reason I don't think this is a major sell off is because their is usually a frenzy of buying to the top something we haven't seen yet. It's going to be interesting how it will end up playing out but I sense a credit bubble being created and it's getting bigger and bigger.

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  #359 (permalink)
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Yesterday's rebound and today Europe/Asia markets seem to suggest we are continuing the climb again.

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America's Debt Burden


Financial Times (German Edition), April 20, 2011.


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Charts attached for 6E and GC.

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