WHO IS THE MYSTERY BUYER?
I don’t know if any characteristic of this massive 6 month rally has been more apparent than the huge futures run-ups we’ve seen at random points during the trading day. Without news, the S&P 500 futures get gunned on huge volume and surge higher. I’ve seen it at least every other day for 6 months. It tends to occur on low volume days such as the one we’re currently experiencing. As you can see in the chart below, the futures are getting gunned on massive volume without any coinciding volume in SPY. This means an institution is jamming the futures higher knowing that they can drive the market higher on no volume. Effectively, they can take out every asking price with a large enough order and immediately create a 0.25% bump in the market in no time. If you’ve been wondering why we’ve seen huge surges on low volume days and conviction high volume selling on down days this explains much of it. I don’t know if there is malfeasance behind this or if the buyer is simply too stupid to input trades at the bid (like most rational investors do as they try to achieve the best low price), but this is certainly an odd phenomenon that I cannot recall occurring so routinely over the course of my career. Who is the mystery institutional buyer that just needs to place their huge block orders with such urgency?
Old video here courtesy of reader L2, but it’s still pertinent:
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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36 Comments
Sounds like Goldman Sach’s superduper computer that’s located in the NASDAQ itself!
Zero Hedge has been on this for months. Anyone who doesn’t think the PPT exists is f$cking brain dead. Pardon my French.
Of course it exists but I think they rather call it PWG.
It’s been out there way before zerohedge was a glint in the eyes of a 30something year old ex hedgie
here is something from Jan 2008
http://www.fundmymutualfund.com/2008/01/amazingly-blunt-commentary-on-plunge.html
and heck that thing has been around way before then
its only been so obvious (and in need) the past 2 years
some of these orders in premarket 3-4-5 months ago were multi billions
Only “God” has that type of money
Daniel Shaffer video from May 09 also explaining it
http://www.youtube.com/watch?v=hxBqAw75Bpo&feature=player_embedded
This is not breaking news …
The Toothfairy or Santa Claus…. I know it’s one of those.
Do you have the tools to look for the same things (either the volume observations or the futures) in other countries’ stock markets? For it to be malfeasance despite global markets all doing about the same upward march, it seems either it would have to happen everywhere or other markets would have to consistently take all their directional cues from the US.
other markets would have to consistently take all their directional cues from the US.
there could be policy coordination, as the same global banks operate on many exchanges and all are recipients of extensive government largesse. but truthfully i doubt that’s what’s needed. there’s plenty of global arbitrageurs who would, on a jump in the US, buy the closed exchanges and sell the US, conveying the futures jump to overseas on no volume at all. i don’t think there really needs to be much or any buying of the actual stocks to effect changes in global stock prices if you control the US futures. the price is just an idea, and a persistent lifting bid in the futures can change that idea.
Exactly.
it must be an open secret at the exchanges.
This is only possible when the goal of the person buying the contracts is not to make money but just drive the market up. Until the bears fight back and punish this action then it will keep happening.
The bears cannot “punish” the action because it is the Federal Reserve doing it, operating through the medium of programmed trading software at Goldman Sachs and other market making firms. A bear would need the total taxing power of the United States government to punish the action. It will only end when the excess dollars, created by the market pumping, flow so heavily into the currency market, that no one wants to buy treasury bonds denominated in a falling dollar anymore.
It’s Gods work.
LMAO…That sounds about right…
shaef, that you?
The Federal Reserve & the plunge protection team of the US government are secretly pushing the prices up to keep the appearance of an “orderly” market.
The US stock market is the biggest ponzi scheme mankind has seen so far.
Nobody with half of a healthy brain keeps their money on US$ nominated assets anymore.
Visit http://www.zerohedge.com to get a glue about what is going on.
Good Luck to everybody.
a SCAM is a SCAM is a SCAM is a SCAM
Although being near the close it could be construed as market manipulation, nonetheless not many people accuse Soros of market manipulation in his (in)famous shorts.
Why should this be the PPT? Why cant this be a macro fund trying to get the SPX over 1100. Many shorts have stops there. If we break 1100 we will get a 2-3% move higher. Well worth the capital for the macro guys to risk some capital.
And this happens all the time .. in indices, futures, stocks etc….
Very well could be which is why I leave the door open for interpretation. What’s odd is that we have seen this routinely over the last few months.
I used to place institutional orders back in my former life. Jamming the ask price all at once when there is no urgency is not how it’s done.
TPC – Could well be. All i am saying is the jamming is to get the 1100 breakout, so it a jamming .. and not accumulation
TPC,
Maybe ETFs are influencing prices of stocks to rise well beyond what’s rational. I also note that stocks trade in a remarkably similar pattern to stocks in their sector (another ETF effect?). Take for example NEM and FCX. While I realize they’re both materials stocks/mining giants isn’t it a little odd that their charts are almost identical? It’s as if there really isn’t any point to trading one company over another, when the result will be roughly identical. In this case look at the XME. If you can chart today’s action and overlay FCX NEM XME you will see the pattern match perfectly. The other freaky thing to me is there are ALWAYS dip buyers. Every daily chart looks like a U, with a tailoff at the end (usually), when traders dump shares. Look at the XME, XLE, XLB, XLF for today. Always the U. This dip buying is keeping the market suspended and creeping higher, because there hasn’t been a penalty for buying the dip since the late June/July sell off. Until this gets slammed hard (which will only happen because of policy change, which I believe is very unlikely) I can see the SPX creeping higher and higher every month until there’s complete exhaustion and the over-valuation is so absurd that it feels like the pets.com era.
Go see Minyanville.com, last Thursday, “Mr. Practical’s” article called “Strange Days”. He belives that in the fine print, under TARP, the primary dealers are allowed to REPO common stock, every night, to the FED. They are driving up the market during the day, taking a “riskless profit” each evening. This process is “reflating”. The Fed likes this, it is a devious way of printing money. Very interesting, same as this article.
and a couple more comment… JTodd is right, they (the FED) only cares about driving the market up, not making money (it’s another way of printing). Also, nobody can see the FED balance sheet, to verify what they are holding.
Ever heard of a “long hedge”?
I filled orders in the Bond pit at the CBOT for 15 years .
You lift the offers on the ask when you have size to move so the scalpers & spreaders have a chance.
What you want to do is watch open interest and delivery.
Doesn’t look like a long hedge. These are billion dollar orders getting filled in less than a matter of minutes. Look at the orders. The ask prices aren’t being raised. They’re being knocked out. Look at the orders.
Many are marveled at the boom in stocks, given really rotten fundamentals. Of course, so far it’s been a function of a lower dollar and there’s a way to “reflate” with those printed dollars that normal conduits won’t allow.
What if the government/Fed realized the most efficient way right now to “print” dollars and “reflate” the economy was to get stock prices up? What better way to do that than print dollars to buy stocks?
There’s ancillary evidence that stocks are acting “artificial”. Stocks aren’t only climbing a wall of worry , they’re scaling the Mt. Everest of bad fundamentals. Tick data is extreme, especially when the stock market is down. We constantly see 1000+ tick prints when stocks are down; this is very strange indeed. Volumes are down at least 20% from normal levels (and much more if you discount for high-frequency trading), making it easier to get stocks up.
Under TARP, the fine print allows dealers to REPO stocks to the Fed as collateral (holy cow is right).
What if there were an arrangement where large dealers buy stocks and stock futures through the day and REPO them to the Fed at the high closing prices? The dealer would book the profits derived from the difference at no risk.
If you look at the trading patterns of the largest dealers, one in particular lost money trading in only one day last quarter. Statistically that’s like finding a needle at the bottom of the ocean.
Of course no one knows for sure because no one is allowed to see what’s on the Fed’s balance sheet. But more and more of us are suspecting it’s not just the normal junk people talk about.
There was a good editorial in the Wall Street Journal describing the government’s and the Fed’s involvement in the financial ponzi scheme that has accumulated over the years. I believe it disingenuous for the government to persist in covering up its complicity by doing more of the same. They seem intent on bankrupting the country instead of steering clear of gobbledygook economics.
This won’t work in the long run and only serves to increase risk.
Sorry, I didn’t post that this is a summary of an article posted on Minyanville by one of the brightest professors “Mr Practical”
“Why cant this be a macro fund ”
Macro funds can’t sustain the kind of buying needed to make this kind of directional move over several months. Without the fed putting a floor under the market, 1/2 would be buying and 1/2 would be seliing and the market would trade in a normal rhythym not 8 months straight up. Since there is not enough money to break the Fed’s floor what do funds do? What would you do? If you can’t beat them join them. Add all of the federal monetary incentives and presto you have a rediculous environment for stocks.
The global response has indeed been coordinated. You could follow the development of it. There was a meeting of global leaders (perhaps a G20 meeting) late last year or this Jan when they discussed how to “fix” the financial crisis. Then in Feb 09, Obama has a meeting with bank execs, Treasury Sec issues his “I’ll do whatever it takes” at his confirmation hearing and then since March the market hasn’t gone down. Perhaps that third leg down from Jan to March was caused in part by transitioning to a new adminstration (waiting for that).
Of course the real conspiracy theorists will say that the market was driven down like that just to keep the republicans out of office. In Sept 08 McCain was even and a little in front of Obama. By Nov he was toast. It’s just being reinflated now. If you’re John McCain you have to believe you just weren’t meant to be president.
The thing is – there is no conspiracy side to this argument. As TPC eloquently explained, there is NO reason for a buyer to execute such a huge order at the asking price on such a low volume day. Why would they effectively execute at a high price? They wouldn’t unless they were trying to force price up.
This is either a trading error that occurs every day, bad market making, stupid trading or something nefarious. You decide. There is no conspiracy theory to this argument. It simply is what it is.
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Does anyone know what software the charts showing SPY and the futures are from?
Why is anyone surprised?
Its called “hammering the market”.
has been going on in Oil and Nat Gas futures for years.
CFTC has been investigating this for years in the energy world.
Just a shift of focus from relatively small commodity markets to a larger arena.
We did a study of SPY vs ES here:
http://wallstcheatsheet.com/trading-markets/trading-101/spy-vs-es-who%e2%80%99s-leading-the-sp-500/?p=3650/
Man, the dollar did a moonshot and equities rally…..Asia was down..US market holding….where’s the correlation??
787 billion leveraged up 20 times equals = 15 Trillion
At least that amount of money must be sloshing around and has to go somewhere.
The market is overpriced but seems to me to be completely rational. (Or one can at least rationalize its level.) S&P500 earnings were $15.96 in Q3 2008 and the market end September (already post Lehman) at 1,166. Things were deteriorating in 2008. Fast forward to Q3 2009 and earnigns are $15.53 or so. Down about 3% versus 2008. Expectation for earnings last year were that they would continue to decline into Q4 (they sure did going negative for the first time in history). Now expectations are for earnings to continue a steady climb higher (as stimulus continues, cost cutting continues and sales stabilize). The S&P’s current level is a heck of a lot closer to its long-term trend that it has been over most of the past 15 years (the past year excluded).
On the surface, the finanicals are in a far better position than last year. Free money from the Fed, no mark-to-market, goverment backed loans, some still with TARP preferreds, etc. A banker would have to be a complete idiot not to make money now (just borrow at zero percent and buy Treasuries). So long as banks are confident that the Fed will not raise rates that will be an endless source of riches to offset mounting home mortgage, commercial real estate and credit card losses (which will continue to rise). The US treasury can issue debt, have the big banks buy it with free money from the Fed (the Fed never really needed to buy Treasuries to keep rates down, just convince the big banks that it was in their interest to do so). If I were a bank that was effectively insolvent, why would I lend to anyone and take on more potentially bad loans when I can get a guaranteed return from Uncle Sam. Earnings don’t look like they will deteriorate any time soon with so much government support.
Trying to find the total video at fox. Unable to find it. Do not like snipetes of an interview. Would like to see the whole thing. This video is from May 2009 and now being addressed.