The Bear Market Has Been Forestalled: Understanding Friday’s Final Hour Melt Up
Note: To sign up to be alerted when the morning blog is posted to my website, enter your name and email in the box in the right hand corner titled “New Post Announcements”. That will add you to my AWeber list. Each email from AWeber has a link at the bottom to “Unsubscribe” making it easy to do so should you no longer wish to receive the emails.
The market was breaking down yesterday (Friday), when the Plunge Protection Team (PPT) stepped in to prevent that, sending the market screaming higher without catalyst in the most unnatural of fashions. Only 30 minutes earlier, one of the best short term traders in the world had tweeted, essentially, to be careful out there. Anybody who has a feel for the tape and technicals knows that yesterday’s move was completely bizarre.
Most will dismiss my explanation as the rationalization of a bear, an excuse, etc.., In fact, while it cannot be proven, it is the best explanation for what happened. As a result, the bear market that was developing has been put on hold and the market will go higher – at least in the short term.
Think about it: if you’re the PPT and you saved the market on Friday, are you going to just let it fall apart again on Monday or Tuesday? Of course not. The Fed, then, is almost certain to follow through on what it did in the last hour Friday on Monday morning to solidify its work. That’s why I’ve already put in orders to cover all our shorts and go long ARKK in a big way at the open on Monday.
This is uncharted territory so I don’t have a good feel for what happens beyond the short term. But, in the short term, overwhelming liquidity from the PPT will override any technical, fundamental or other consideration.
I know it’s hard to swallow that this kind of thing happened; that it can happen in the United States. It sounds like a conspiracy theory: Kennedy is still alive, they are researching aliens at Area 51 in Nevada, Bigfoot exists, etc… The good thing about what I’m saying is that it’s “testable”, If the market doesn’t melt up on Monday, the prediction I have drawn from my theory will have failed to materialize, casting doubt on it.