Friday, August 27, 2010

Did Bernanke Speech Spark a Rally?

Fed Chair Ben Bernanke delivered a keynote address to the attendees at Jackson Hole, Wyoming, the annual con-fab of economic and political elitists who have gathered to discuss and dissect the global economy.

Stocks were up in the first half hour of trading as the revision to second quarter GDP had come in a little better than some had expected, down to only 1.6% growth, lopping off nearly a full percentage point from the initial 2.4% figure. Immediately upon reaching the podium, however, Bernanke's mere presence sent stocks into a tailspin, right at 10:00 am, odd, in that no words had left the chairman's lips, though text of the speech had been widely distributed by then.

Were insiders shocked at what was contained in the speech? Probably not. The dramatic move to the downside was probably the work of a few well-timed large sellers working in concert, which they have been known to do. Within minutes, stocks began thrusting forward, sparking a sizable rally that lasted the length of the session.

As to whether the move was a response to what Ben Bernanke told the assemblage of high muckety-mucks in the wilderness will probably be the story of the day, though it probably had about as much to do with stock movement as whether Drew Barrymore and Justin Long will remain a couple (odds say they're split up by the third week in September).

No, today's outstanding rally in equities was once again nothing more than pure unbridled market manipulation by large firms seeking quick turnaround profits. One can note with ease the smashing decline and quick rebound off the morning's V-shaped bottom as a sign that adept traders sent indices hard lower, loaded up and then bought incrementally, stringing along the sheepish followers.

In a day to two the same shrewd buyers at the bottom will be sellers at or near the top. Once their round-trip trade has concluded, it will be back to the usual down-up-down pattern that has persisted for the better part of the year. Bernanke said little in his speech to assuage fears and nothing to tip the hand for future Federal Reserve policy decisions.

The entire text of the chairman's mind-numbingly boring riposte can be found here.

Dow 10,150.65, +164.84 (1.65%)
NASDAQ 2,153.63, +34.94 (1.65%)
S&P 500 1,064.59, +17.37 (1.66%)
NYSE Composite 6,794.91, +129.65 (1.95%)

The result of the Wall Street's one-day wonder was for advancers to eclipse declining issues by a wide margin, 4876-877 and new highs to vault past new lows, 247-156, once more. Again on the light side, volume spoke loudest.

NASDAQ Volume 2,169,648,250
NYSE Volume 4,295,823,500

This is absolutely the most rigorous of trader's markets, or, putting it more succinctly, Wall Street has completely devolved into a casino in which the house (represented by the major insider brokerages and trading firms) makes up rules on the fly, the dice are loaded, decks stacked and the roulette wheel is built on an adjustable ramp.

Small investors and those outside the loop are certain to become fodder for the big feeders.

While stocks were soaring the precious metals were left to linger. Gold gained only 60 cents, closing at $1,236.00, while silver added 6 cents, to $19.04. As one might expect, crude oil was the big winner, ramping up $1.81, to $75.17, its highest price of the week.

One makes choices in his or her life, of whether to believe in systems which have proven to be easily manipulated and difficult to comprehend, or to trust what one sees and hears and judge for oneself. Anybody believing today's rally was significant and a sign of better days ahead surely belongs in that former camp.

The rest of us still aren't buying into the "happy days" argument.

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