The only thing that moves the market up is more buyers than sellers. The only thing that moves the market down is more sellers than buyers. But we’re talking about dollars, not people.
I pulled my money out of the market ahead of James Comey’s hearing last summer. I was concerned Comey would say something that would lead to a Trump version of the Saturday Night Massacre. I was wrong. Although not by much, apparently. As it turned out, Trump did try to fire Mueller but was stopped by his White House counsel who had to threaten resignation to stop the order.
Fortunately for me, I knew a market pullback was inevitable against Trump. As of last week, I’m back to beating the market. While that serves as a bit of an ego boost, that’s not what I’ve been paying attention to. I’ve been watching the market lose ground for months now, but something looked different over the last couple weeks. The market looked like it was being propped up.
There might be those who suggest that such speculation is irresponsible. That so much volume moves through the market that it would be impossible for anyone to make a significant or reliable impact. Or that high frequency trading machines occupy most of the volume so it wouldn’t be that simple. Or, isn’t market manipulation illegal?
The Chinese government intervenes with the Chinese stock market on a regular basis, guiding things towards and outcome which they’d prefer. It’s being reported that the Saudis are doing the same thing every time bad news hits. But not America right? Prior to the great recession, JP Morgan rallied his fellow millionaires and bankers to buoy the market. The purpose was to lift the public’s confidence in the markets. It’s genuinely the core purpose of market manipulation, to give the general public a false sense of security. The wealthy can’t control the markets, but they can certainly influence how the public sees it. Fortunately for everyone, markets move in cycles.
Over the last couple weeks, I saw the potential for a huge market sell-off. The kind that might’ve put us past any meaningful tipping point. Almost every trading day started with significant downward momentum. Yet on a regular basis, the market would have a sharp rebound mid-day. In many cases, the inflection point looked deliberate and calculated. Almost every day that included a mid-day rebound closed in positive territory.
For example, the SP500 closed at 2485 yesterday, and opened at 2482 today, starting with that same downward trend. Then the market almost immediately shot up to 2507, suggesting an influx of buys. Then the downward momentum took back over and dragged the market back down to where it started the day at 2482. Then immediately, the market shot back up again, back to 2506 which is where it’s at currently.
There could be a variety of explanations for such market behavior, including pure chance. But it looks rather systemic to me. It looks like someone said don’t let the market have a bad day. And it’s not just today. I’ve seen this behavior on almost every day that’s closed up in the last 2 weeks. If I were to guess, I’d say that there are some very wealthy and very powerful individuals who are spending a great deal of money to maintain public confidence in the markets. I would guess that they see the writing on the wall just as the rest of us do, but are victims of their hubris and think they can stop what’s coming. JP Morgan and his banker friends couldn’t stop the great depression. I don’t think the wealthy elite and bankers of today can stop this either.
My Mental Model 