Monday, April 2, 2012

Predictable Markets Sure Signs of Manipulation and False Hope

Money Daily does not make many predictions, but last week it was postulated that both Friday and Monday would show gains on the major indices, due to window dressing (Friday) and start of quarter allocation euphoria.

Both of these predictions were proven correct by a market that is now so transparently manipulated that investing has become nothing more than understanding the general mood. That is not a healthy market and surely not a sustainable model, but it is what we have, thanks to lax regulatory bodies and almost omnipotent control by the banking and financial services industry.

Friday and Monday's dual melt-up (on abysmally low volume, as usual) makes a case for the decrepit condition of US (and to a large degree, global) markets. They are old-boy networks and the only traders are strictly Wall Street insiders. These tendencies reveal much of what the general public does not perceive: that the markets have been broken since the financial collapse of 2008 and the ephemeral "gains" are nothing but the product of excessively loose economic policy and a disastrous fiscal policy being fostered at the top of the federal system.

Additionally, to say that the system is corrupt would be giving it a good name. It has gone well beyond corruption; what we now have is a false oligopoly that is baseless and doomed to eventual failure.

A couple of key points were made from data today, which, in more normal times, would have resulted in some caution and probably a general decline, but today's market is a monstosity of central planning which has nothing to do with the mundane facts of economic reality.

The ISM Index - a national barometer - checked in at 53.4 for March, after a reading of 52.4 in February. The metrics used in the calculation of of the index are distorted beyond recognition, as are most "official" economic readings. Even still, taken at face value, the index is registering just bare expansion, and will likely be revised lower in an upcoming debacle of data massage.

More importantly, the February construction spending number came in at a disappointing -1.0%, following a -0.8% reading in January. This, in the midst of one of the warmest winters on record is a serious issue, and, discounting the veracity of such a statistic, the real number is probably more like -3.0%.

The markets and the computers that do the trading were obviously adjusted to ignore these numbers; thus, the inordinate rise in stocks on the day.

It's a very sad state of affairs on Wall Street. The desperation in the brokerages is palpable and apparent to anyone who watches these things with both eyes open. The eventual crash will be horrifying to anyone with trust in these hopelessly deranged markets.

Dow 13,264.49, +52.45 (0.40%)
NASDAQ 3,119.70, +28.13 (0.91%)
S&P 500 1,419.04, +10.57 (0.75%)
NYSE Composite 8,280.83, +73.90 (0.90%)
NASDAQ Volume 1,778,994,250
NYSE Volume 3,579,872,500
Combined NYSE & NASDAQ Advance - Decline: 4092-1538
Combined NYSE & NASDAQ New highs - New lows: 273-43
WTI crude oil: 105.23, +2.21
Gold: 1,679.70, +7.70
Silver: 33.10, +0.61

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