In 1964, Justice Potter Stewart tried to explain “hard-core” pornography, or what is obscene, by saying, “I shall not today attempt further to define the kinds of material I understand to be embraced . . . but I know it when I see it . . .”
David Fry knows it when he sees it and points out the offending material in yesterday’s intra-day chart of the SPY. I often sum up action like this for members as simply fake, Fake, FAKE – using one of my favorite Seinfeld clips where Elaine plays the part of Goldman Sachs, who admits to Jerry (the unsuspecting public) that she faked it “all the time.” As Elaine explains to Jerry – “It wasn’t you, I just couldn’t have them back then.” 2009 was like that – we just couldn’t have any real rallies so our government and their pet IBanks (or is it our IBanks and their pet government – it’s hard to tell these days) simply got tired of waiting for investors to get in a groove and decided to fake the rallies.
Once the faked a few rallies early in the year, it just got too easy. Also, with practice, they got better and better at faking the rallies – so good, that they began to get paid for it with record profits as the High-Frequency Trading Platforms (ie. front-running) they employed using the free money they borrowed from the Fed turned into little money machines to the point where (as you can see in the above chart) they now run them more than once a day.
Notice the pattern of high volume sell-offs or flat activity followed by low-volume run-ups. The game is to run the markets up to levels that trip retail investor interests as the charts signal a “break-out” or, even better, trip buy signals at funds and ETFs where retail investors are forced to “go with the flow” as their committed capital chases every rally and then, once the trap is sprung, the big boys start to sell into it, leaving the retailers holding the multi-Billion Dollar bag.
Right now, you can say it’s a win-win as the market has gone up for 6 consecutive months, with the entire US market gaining $7Tn in value in the second half of 2009. Isn’t that fantastic? Truly Lloyd Blankfein is doing God’s work here so what could be wrong with that? The problem with playing God is that…
