Last week I made the point that the all of world’s money creating power will be employed in an effort to move the stock market higher during the time of year that is most likely to host a market crash. That effort is going on right now and that is why stocks are going up.
There are commercials on the radio advertising products to invest in to protect assets during the certain stock market crash that is just around the corner. A hand full of billionaires are now warning everyone about stocks being over priced. The only way a crash can occur now is for an huge negative external event to take place. Because of the nature of crashes, they don’t occur when folks are prepared.
Again, the various plunge protection teams around the world have unlimited funds to work with. They take no personal risk. Every day, just like today, key stocks on charts will look like they are just on the verge of breaking down. Experienced technicians will recognize the patterns. However, stock prices are not being determined by supply and demand. The overwhelming majority of traders, professional and amateur still believe stock prices are being determined just as they always have been. Short sellers are offering their necks to the high frequency trading firms.
Notice the stocks that have fallen off this fall. All but a few are the kind that earn actual profits, have real revenue and can’t make any pretences. Stocks where value is created by hopes, wishes and dreams are always first to fly higher. Moving the Big Cap indexes higher is always the first choice. If that doesn’t work efforts are made to move the mid-caps. If nothing else will move, the Russell 2000 gets goosed. On any down day that is initially uncontrollable, the high frequency firms start sending out feelers to find any stock where shorts can be squeezed. Any time downward momentum slows the high frequency firm start stabilizing the price much like is done during new offerings. All consolidation patterns become bullish. Phone calls are made to firms with buyback plans assuring them someone has their back. Complex algorithms accomplish the simplest things. There is no need to know the formulas. These are some of the things the algorithms do.
The chances for a down market between now and 2016 has been seriously reduced. I am scaling back bearish positions. Patience will pay off. It looks like there will be more time to get short, unless of course the external negative event occurs. I will take that chance.
Two things can eventually happen and both are bad for the stock market. Americans who are dead from the neck up can come to their senses or the ongoing political agendas will do so much damage to the economy that even the hope and dream corporations will follow the path of stocks that have to rely on actual results that cannot be embellished,