We have written and spoken about how the Central Banks are Training You and one part of that “training” is becoming perfectly clear.
Please notice that any time the market has a tough day to the downside–for whatever the reason–the following day is a rip-roaring, face-ripping, gap-up-at-the-open rally that acts as if there was or will be some great piece of news. The action is usually frenetic and wholly lopsided to the upside and begins at about 4:00am in pre-market futures trading.
Once the open has passed and there is no fade, the “locals” determine that the “all clear green light” is on and it’s OK to buy any stock on the board, regardless of industry or sector. And of course market internals run 90% positive.
This is all part and parcel of the “Illusion of Price”. This concept says that regardless of fundamentals, risk or reality of the overall economic situation, as long as the prices of market assets hold up, nothing fundamental is “too wrong”. This is the main lever as to how the markets are continually controlled by the Central Bankers.
FYI– Ben Bernanke and ALL the Central Bankers around the world are the Markets Primary Benefactors.
Remember back in last 2008 when the world stopped? Even then the markets stopped crashing long enough for the holiday’s to come and go. Between December and late January, markets traded quietly and in a tight range. Until the February-March final crash. So cover your shorts, buy the most levered-up or shittiest company because for the next three weeks nothing can go wrong. Or at least until next week’s option expiration.
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such a cynic, Bleier! 😉
The secret to price is not fundamentals or technicals but rather WWBD (What will Ben Do) as liquidity sinks and floats all boats.
As the economy and demographics deteriorate, interventions increase volatility.
Key levers include gold, oil, and interest rates. The gold paradox was a Larry Summers thesis/invention that basically posited that you could print as much as you wanted as long as gold prices and interest rates could be controlled (while eliminating other important inflation/printing indicators from official statistics). That is the current M.O.
Brings back recollection of the good old days, with FDR sitting in a bath robe deciding how much gold should be worth every day before breakfast.
Central banking is a subset of psychology. Expectation management is the cornerstone of modern monetary systems. Awesome writeup, Scott.
http://youtu.be/8TOHOEZIz3Y scott this tunes 4 u
What a great fucking post.
“So cover your shorts, buy the most levered-up or shittiest company ”
I laughed out loud. Well done.