Thursday, May 2, 2013

Markets Say 'Never Mind' about Wednesday's Declines

In a real-life parody of Gilda Radner's Saturday Night Live character, Emily Litella, stocks, commodities, everything simply took no heed of Wednesday's steep declines and said, "ever mind," as though they had been mistaken about the direction of the economy, the advisement from the Fed's FOMC, or something, and thus, virtually erased all of the bad from the day before.

Not to say that these markets are fickle, but there happens to be a very good explanation why all risk assets were hammered lower the previous session: no TOMO.

TOMO stands for Temporary Open Market Operations (as opposed to POMO, which are Permanent operations), the facility by which the Fed creates new money and promptly hands it over to the primary dealers, and, supposedly, other good friends of Uncle Ben Bernanke - he of the big heart - and the money is put to work goosing the prices of everything that isn't glued down, that being mostly stocks, but also, commodities.

In order to keep up with the game, the Fed has published a list of dates and amounts for the purchase of Treasuries, here. In may the Fed will purchase $44 billion worth of treasuries because they bought a billion too many last month ($46 billion) There is a separate list elsewhere on their site for Agency-backed securities purchases which amount to roughly $40 billion per month.

So, save those dates! Those are not days to go short the market, but they are certainly the ones you'll want to be long stocks, because the Fed is supplying the capital.

Sometimes, the reality is so stupid and obvious one has to just wonder how the whole system hasn't blown up already.

Dow 14,831.58, +130.63 (0.89%)
NASDAQ 3,340.62, +41.49 (1.26%)
S&P 500 1,597.59, +14.89 (0.94%)
NYSE Composite 9,246.72, +70.93 (0.77%)
NASDAQ Volume 1,715,556,375
NYSE Volume 3,686,534,250
Combined NYSE & NASDAQ Advance - Decline: 4856-1594
Combined NYSE & NASDAQ New highs - New lows: 395-46
WTI crude oil: 93.99, +2.96
Gold: 1,467.60, +21.40
Silver: 23.83, +0.487

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