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Stock Market Through October

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bbbDon’t click on these headlines. They are images and just for display. September through Mid-October is the logical time for the market to crash. Will it crash? Everything under the sun is being done to hold it up. Headlines like the ones displayed here are not what they seem. They are designed to draw in short sellers to squeeze so as to help push the market up. The financial news, regardless of where it originates, does not report much genuine news. The financial news is an opinion management service and promotes faith in the financial markets. The only time a lot of bearish articles show up, is when there is a planned boost to equity prices. The more traders who short are expecting a decline, the easier it is for manipulators to drive it higher.

Who is buying stocks? The public is buying only a little and hedge funds are not buying much. Certain central banks are buying heavily. There is no way to tell exactly what the Federal Reserve is doing, but be assured, it is buying through surrogates if not outright. Friends of the Fed are creating artificial demand through the derivatives markets. These are large institutions which get advance information and other benefits from the Federal Reserve for helping make each day green. There are corporate buybacks. This is a type of corporate cannibalism that generates higher earnings and stock prices in the short run but that will eventually break the companies.  The Federal Reserve assures the corporations that they have their backs and that their buys will be profitable.

Think of this as a chain that will be broken. We don’t know what link will fail but when one does, the whole system will collapse.

Central Banks + Friends of the Fed + Corporate Buybacks + Short Sellers Getting Squeezed=Higher Stock Prices

The central banks will not fail. You as a citizen can only invest what you can earn and borrow. Central banks have no worry about taking losses. They get all the free trading money imaginable free, with just a click of the mouse.

Friends of the Fed are organized crime. They will participate as long as the Federal Reserve’s guarantees allow them to make a profit. They are the ones who squeeze short sellers. All of their trades are short term, sometimes just seconds apart. Friends of the Fed are the most likely link in the chain to break. When the Federal Reserve can no longer guarantee them risk free trades, they will disappear into oblivion.

Some corporations are already backing off of buyback programs. Many corporations have losing positions in their own stock already. The eventual losses will be devastating. Corporate officers love buybacks because they allow them to get paid the largest amount of money in the shortest period of time.  If the stock of their companies tank, corporate officers have little concern. Their cake has already been made and all they have already eaten it. Corporate buybacks could evaporate very quickly.

Short sellers amaze me. So many still trade is if they were in a genuine trading environment. They are shrinking in number because so many have gone broke.

There are two ways the market can crash this fall and they are both long shots. An enormous amount of stock could come on the market from unanticipated sources. A war or an assassination could trigger something like this.  Members of the Federal Reserve Open Market Committee could suddenly be overcome by guilt and confess as to what they have been doing and what the outcome will be. Definitely don’t count on that.  The other way is for one of the links to come undone. Friends of the Fed are not doing as well as they were. I know nothing of their exact profit and loss situation. They will cut and run sooner or later. I have no way to tell.

Central banks are not going to give up controlling stock prices. My expectation is that they will be successful in keeping the market up through October. It is getting harder to do. My portfolio consists of cash and just a few small positions in bear etfs. I am a good trader but I know my limitations.  Like everyone else who trades I would have to trade against the government based on what I expect the government to do. Even expecting the market to move higher through October I won’t go long. The chances of a huge one day washout are simply too great.

Can the Stock Market Move Higher?

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sell-buy-word-question-mark-background-30486243The informal consortium of cooperating interests is showing signs of breaking up. Never forget that the side that manipulates the market has an unlimited supply of unearned money to use. Both bulls and bears within the general population can only trade with money they have earned plus what they can borrow on margin.

Here is what I am looking at. Techniques of drawing in short sellers are not working as well as they have in the past. Pumping stock prices is difficult without the presents of short term short sellers with stops. Retail brokers are still sharing customer’s position information with high frequency traders. Very few retail customers short actual stocks. Even one customer shorting just one hundred shares or an odd lot, can trigger a short squeeze in a certain issue. High frequency traders follow retail transactions the same way sophisticated traders in days passed used odd lot short statistics. To a manipulator one small short sale transaction represents a general thought pattern of naive traders in general.

The news media hasn’t turned negative but occasional stories with real information are starting to bubble up here and there. The media and advertisers have the same general interest as wall Street firms. The media, however, can not take a chance on appearing stupid or seeming unaware.

Your government began the practice of supporting asset prices during Reagan’s administration following the 1987 crash. From that time on, government policy has supported stock prices indirectly 100% of the time. In 2003 as the 2nd Iraq war was starting marked  the beginning of direct intervention. Henry Paulson was appointed Treasury Secretary in 2006 for the express purpose of keeping asset prices elevated and moving them higher. That worked until 2008, The QE initiatives were introduced in 2009 and have been present ever since. From this point on, to move stocks higher, manipulators will have to carry risks themselves.

There is no question as to whether or not stock are getting outside support. This is the weakest time of the year, historically. Any follow through to the downside from here will hurt the general economy and could possibly cause enough fear to render any orchestrated attempt to support the market unsuccessful.

A danger they face now is a growing awareness of the general public. Most people are unaware that all of government’s gifts to wall street come at their expense.
Central banks can increase their investing directly in equities and they might. Any further decline in stocks will make corporations re-think their buy back plans. Losses on their own stock may become staggering.

I am still 70% cash and 30% bearish positions. I will say, so far so good. The increase from 20% bearish to 30% has come mostly from profits. If the market crashes suddenly, I am willing to live with that ratio and be less than fully committed to the short side. As dramatic as crashes can be, there is more money to be made on a slow decline of the same magnitude. When a market crashes, bulls can’t close their positions and bears can’t get fully invested. We have to live with circumstances as they are and not as we wish them to be.

The market is going down. That is for sure. Getting positioned for the coming decline is very tricky. Many times, bears who are impatient, lose all of their capital before the decline starts. That scenario needs to be avoided above all else.