The FANG style stocks are experiencing what up to this point is a controlled correction. As expected, anyone with a short position in Dow type stocks is getting the life squeezed out of them. This is a major task and it is likely to fail. There is not one of these stocks that would be where it is today without the massive benefits of virtually free borrowed money. The bottom would fall from beneath each of these stocks were they not heavily purchased by the Swiss National bank and other central banks. Not an economy in the world can survive a loss of buying power by the world’s wealthiest citizens.
So what is the goal? Keep the decline in the FANGS under control and protect the averages in general from damage by running up other big capitalization stocks to make up the difference. In a real market, one average might be up while the other is down a hand full of times over the period of a decade. In a rigged market, splitting the markets by ratcheting one average up while the others rest occurs on a daily basis.
How long will activity like this go on? It will not stop until and unless coercive action is taken to make it stop. Rigging financial markets is the one most profitable activities of the last 100 years. It may be the most profitable ever.
Human herding has always had a presence in the world. With the advent of the internet a number of years back, the practice of human herding has gone parabolic. Currently, human herding is second in profitability only to the purposeful manipulation of stocks. The herd-ability of humans is what provides profit for the FANGs. The herd-ability of the human species is less than constant. The mind actually does have a defense against over-herding just like the body builds up tolerance to foreign substances. Herd people enough and they start rejecting the control efforts. It takes time, but the success of herding activities of these organizations will moderate greatly over time. One truth that is recognized in advertising is that people develop a type of immunity to any approach or technique over time. It will work the same for corporations which make their profit herding people.
There are certain aspects to a rigged market which would never occur in a non tampered with system. You will notice the near impossibility of putting together a portfolio of profitable short positions. This is always difficult in a rising market but only in a completely rigged market is it an actual impossibility. Putting bear ETFs in a portfolio has the same issue. This is no accident. Profitable bearish positions can snowball and empower bearish money if equity builds up. Once control is lost, all else is lost as well.
One of the things you will notice about this rigged market situation is that the meaning traditional indicators is reversed. Back in the good ole’ days a broken trend line would say, “short this stock. It is a good risk.” With the system of rigged markets, such a broken trendline says, “there is going to be a short squeeze in FB. I think we will see a vicious short squeeze here in facebook. Lets see how it works out.
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