This morning's most prominent bit of news: OPEC is begging the US to open the taps on the Strategic Reserve. And, as I expected, the herd is treating yesterday's highs like they were poison. I'm sure by now you've heard about how the Energy Department "found" 900 million extra barrels of oil lying about. You probably think that the ensuing 3% drop in crude oil futures triggered a buying frenzy in stocks.
A neat story, eh? I'm sure that by the time tomorrow morning's newspaper hits your step the insiders will have convinced themselves that it was true. But for now, anyone with access to both the CME and CBOE tickers knows the truth.
Here's what actually happened: As the herd threatened to turn back the clock on yesterday's rally, someone picked up a phone, called the Chicago Mercantile Exchange and ordered enough near-term S&P Futures (specifically the SPZ 04 Dec 2004's) to move that asset up more than 10 points in half an hour.
The arrival of the news regarding the discovery of 900 million barrels of oil didn't hit until 15 or 30 minutes after this buy was already underway. And still neither fact actually moved the market for about an hour. That's just how scary the idea of buying yesterday's highs seemed to seasoned traders.
We've been had by the "The Visible Hand," folks.
I call it "Visible" because you can see it do its dirty work. The implied reference, of course, is to Adam Smith's "Invisible Hand of the Market": the action resulting from the natural and normal give and take between the bears and bulls.
And just to ice the cake, they did it again around noon: at 11:45, the S&P threatened to give it all back, seemingly against all common sense, "The Hand" bought even more futures contracts. And again it took the market an hour or more to respond.
Funny what can happen to the market seven days before a deadlocked election.
Well, not too funny in the laughing sense.
There is an axiom in this business: Any time they try something unusual more than once or twice it becomes both usual and tradable. Having been nailed several times in the last few years by this sleight of hand, I am developing a trading method for Professionals to capitalize on it. The trick will be to watch the CME's futures in real time and buy the 10-point gaps that develop as the main market stares in astonishment.
...allow me to turn things over to WaveStrength Apex member M.B., who, like me, watches the markets all day long. Here's his take on the situation:
"Hey buddy - I'm standing here bloodied from this knee-jerk in the futures pit. Not even Crown can kill this pain. First time in a long while. But I'm closing the 1,075 November put sale for I believe we fall from here or stick here till after the election. And if no one believes in manipulation then the last two days would be a great opening for discussion. The amount of contracts popping in at key points is totally amazing to me, something I have never before witnessed."
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