There is a small group of people today who are flipping out. They are pulling levers on a machine, but the machine is no longer responding. What's the worst part?
There is no mechanic.
There was a widespread assumption that there was a mechanic. But yesterday he kindly reminded us, once again, that he is actually just an academic, and that he is unsure whether any of his non-traditional tools will really work.
There comes a point when smart money figures out that more stimulus means that the previous dose didn't work.
Wrote that last July. I think we're getting close. Look at metals today: they're solidly in the red, even gold. The US dollar is up, the AUDUSD is down. 10s and 30s are down, yields are up. The levers aren't working; the machine is busted.
Recall this rule from the post on manipulation the other day:
All manipulation comes to an end when the manipulator cannot make a stock do what he wants it to do. When the stock you are manipulating doesn't act as it should, quit.
Somehow I doubt the life-long bureaucrats and academics are half as smart as Jessie Livermore was, so they probably won't quit for a while. But it must be remembered that the Fed is in the business of making money for its shareholders, and when it sees that it's not making a return on its manipulations, it will cease them. They've got to be at least considering it after yesterday.
I got some puts (SPY 144) as planned yesterday, around 12:40 pm. I will use the high as a stop. Today I think we could bounce so I'll look for some 143 calls. I don't see much above 1435. We could test the 1418-1420 area easily. There is probably much more in store if the Fed wises up and quits pulling levers.
Today's title is a riff on a great tune. Enjoy.
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