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PPT Emerges From Shadows

By: Rick Ackerman, Rick's Picks

-- Posted Wednesday, 23 January 2008 | Digg This ArticleDigg It! | Source:

Rick’s Picks

Wednesday, January 23, 2008

“Phenomenally accurate forecasts” 

We’ve never doubted there’s a Plunge Protection Team lurking out there somewhere, ready to do battle with the gravity, but until yesterday we were skeptical The Team would try something so unsubtle as buying stocks hand-over-fist when a selling panic threatened. That’s the way most market-watchers seem to think the PPT operates, and their conspiracy theory is not without merit. One reason it seems plausible is that, with the backing of the U.S. Treasury -- and no margin requirements! -- The Team could propagate an overwhelming rally risking relative chump change.

But is the government’s mere ability to temporarily manipulate the markets higher justification for doing so?  Consider the consequences if official meddling were to backfire in some presently unimaginable way. Heads would roll. Cushy jobs would be lost. Performance bonuses would evaporate. More to the point, who needs some shadowy cabal to keep stocks from collapsing when there will always be panic-stricken bears ready and eager to do the job -- to do it far more effectively, we can safely assume, than any dozen of the best and brightest MBAs the government could possibly recruit from the ranks of Wall Street.

The bears acted yesterday as though they were out to prove the point, driving one of the most powerful short-squeeze rallies we can recall. Its strength was deceptive because probably half of the move was hidden when the Dow fell 400 points in the opening minutes of the session.  In a more rational world, the blue chip average would have opened down 1,000 points, keeping pace with plummeting stocks in Europe and Asia; instead, when U.S. stocks began to trade, they held like a rock near the overnight lows.

This is shown in the S&P futures chart above -- as compelling a picture as you will ever see of what traders refer to as “strong hands.” This is not the buying of mere institutional traders second-guessing each other so as to produce a raggedy series of lows. Rather, it is a buyer whose 1255.50 bid was set in concrete, fearlessly oblivious to the selling panics that had overwhelmed the world’s bourses for two consecutive days. The bid held for long enough to exhaust sellers, as it doubtless was intended to do, causing the major averages to rally back to unchanged on the strength of the massive short-covering that followed.

The Plunge Protection Team may have rescued the market for a day, but we doubt it will prove clever enough to reverse the bearish tide.  Nor do we expect yesterday’s unscheduled, 75-basis-point easing by the Fed to stop the bloodfest in the credit markets. The central bank’s timing may have been perfect, coordinated as it obviously was to add punch to the PPT’s buying of index futures, but at the end of the day it left hanging the menacing question “What next?” – or to be even more cynical about it, the question,“So what?” 


Seminar Filling Up

The Hidden Pivot seminar scheduled for February 9-10 is already half-full, so if you’re planning to attend, we’d suggest registering soon. Click here for a $50 discount and instructions for signing up. The class will be held on Saturday/Sunday from 9:00 a.m. to 12:30 p.m. Mountain Time.  If you want to learn how to forecast stocks and commodities as confidently and precisely as top pros, this is an opportunity you should not pass up.


Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. 

-- Posted Wednesday, 23 January 2008 | Digg This Article | Source:


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