Anyone following the markets knows the drill by now.
A bad economic report comes out (e.g. consumer confidence) and the market plunges 1%. An hour later, there's a magical reversal and suddenly, we go to new highs for the day, which "sticks" until the close.
A huge IPO gets pulled (Liberty Mutual) due to bad conditions - the market sells off at the open, and goes down about 3/4%. Then there's a magical reversal and we go to new highs for the day.
Trucking volumes collapse and are reported. The market sells off, and then suddenly, there's a magical reversal and the market goes to new daily highs.
Merideth Whitney comes on the air and says that regional banks are cooked - their revenue model is broken and the collapsing yield curve will crush them. In addition, trading volumes are down at the major investment banks, so that will cream their earnings. BANK, the Nasdaq Bank index, takes off on a literal vertical tear as soon as she says this, rising by more than FORTY POINTS in an hour.
David Tepper says that if the economy is good, the market will go up. If the economy is bad, The Fed will print more money and devalue the currency, and the market will go up. Nobody questions the obvious disconnect (since when can you borrow your way to prosperity, or debase your way there - and in what instance in history has this ever worked?) but the magical buy-fairy shows up and the markets scream higher, rising nearly 3%.
Does anyone remember 2007 or early 2008?
Bear Stearns blew up and the overnight futures were essentially lock-limit down. What happened right after that? The magical buy fairy showed up and we went to recovery highs - nearly 200 handles above where we were when Bear exploded.
Anyone remember "Buffett will buy the world"? Was anyone ever prosecuted for all the false rumors that moved the market 1 or even 2% in the last hour of trade - those rumors always seemed to hit CNBS when the market was down 1% or more and threatening to break some key technical level. Suddenly, an outright lie would be "disseminated" and the market would violently reverse.
How about Dick "I'm gonna burn the shorts" Fuld? The market roared, right? For how long? And was he right - or was it Lehman that burned?
Look, you can blame manipulation, you can blame The Fed, you can blame whatever you want.
But what I know from more than 10 years of trading is this:
When the market starts to act like this - when there's this "invisible hand" that magically levitates things, when people resort to disseminating outright lies about the market or specific companies and do so to counteract actual bad news that would otherwise result in moves down, it is a sign of desperation - there are people with money and power who are on the wrong side of the bet and they are willing to deceive you and rip you off outright to avoid being the one with the bag.
Do with that information what you will.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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