The Fed Is Buying Stocks

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Very suspicious final hour yesterday (Friday) with the S&P rallying 21 points on no news in the final 46 minutes that was reminiscent of two Fridays ago (3/26) when the NASDAQ was breaking down only to rally 259 points (~2%) in the final hour and 9 minutes on no news.

In my fifteen years of professional investing I have never seen such bizarre moves into the bell on a Friday afternoon. Whereas two Friday’s ago was an obvious place for the Fed to step in to bail out a market that was on the verge of breaking down, it’s harder to fathom what their reason might have been yesterday afternoon though one can speculate.

Perhaps they want to acclimate investors to these types of moves so they’re less suspicious of them. Perhaps they want to punish short sellers into a long weekend to make them think twice about shorting this market (the action the last hour and 9 minutes Friday March 26 got me to cover all our shorts at the open on Monday March 29). Whatever the reason, this is unnatural buying in my opinion and, though I can’t prove it, I believe this is the Fed buying stocks with the intent of pushing the market higher.

What this means is that though this is by far the greatest bubble in financial history, it is probably unshortable at the moment as I talked about in “The World According To Top Gun #60: Shorting The Bubble After Friday” (Sunday March 28). In that video I discussed how I was giving up shorting this bubble for now because I believe the Fed is buying stocks and I will instead focus on being long high quality, defensive stocks that will do well in a bad market but won’t be punished by the Fed’s stock buying and the precious metals and their miners who are beneficiaries of the Fed’s explicit and surreptitious interventions in the market but also won’t be hit if they decide to intervene to move the market higher to bail it out or just on a whim.

Posted by Greg Feirman  ·  Trackback URL  ·  Link