The Federal Reserve is under a political directive to elevate asset prices. Never forget that. So far, my forecast for the fall stock market is right on target. The only reason I can do this is that it is all complete manipulation. Suppose you were one of the elite who dictate policy to the U.S. government. What would you have the government do with respect to the stock market? The the degree it is possible, you would create an unending uptrend in asset prices that would be your cash cow as long as it was possible to keep it going. This is not rocket science. It is only an understanding of human nature and how the animals act upon the incentives in front of them.
So what is next? The deep state knows you better than you know them. Technical Analysis dogma survives even though it is a trap. One glaring bearish market indicator it that of breadth which I show as the percentage of stocks above their 200 day moving averages. The chart shows that while the market has been making new all time highs, the averages are being carried by a serious minority of stocks. The deep state folks understand that concept. If the breadth indexes can be turned positive, that will bolster confidence even higher and suck more money into equities. The focus on the part of the manipulators will be to change the breadth cosmetics while allowing the Fangs and other hot stocks to take a well deserved rest. Hope is that with improving breadth numbers, the fangs will experience a shallow correction and be brought back into the picture a little further down the road. Also, watch for serious short squeezes in stocks where short sellers may have accumulated profits.
In a market like this, the most dangerous time to short a stock is after it has completed an important technical pattern like a head and shoulders top. This is squeeze city and a gift. Talk of low volume is pervasive but volume is much lower than what is suggested. When the in for the day only and split second trades are subtracted, there is almost no volume at all. As long as there are no long term holdings being sold off, moving the market higher is a piece of cake.
So, for the foreseeable future look for breadth to miraculously strengthen as the middle of October approaches. Any time there are bearish articles by major research firms, shorts are being drawn in for a new round of squeezing. Other bearish articles are there for the same reason. The days of agenda free news are over. Watch the NFL stories start to fade. When news hurts the deep state it disappears. As the fall season all pattern turns from bearish to bullish expect the most wonderful news to be announced. The economy is rotting from the bottom up. If some kind of economic crisis emerges, central banks including our Fed will announce that they are buying up excess supply of stock “to save the world.”
Many understand that the market is being manipulated. Only a minuscule few understand that manipulation is all there is.