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Fed intervention has completely destroyed the markets!

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Federal Reserve intervention has killed natural market processes. The Fed is also starting to lose control of its ability to manipulate the markets. Today is a good example. The S&P and Dow are negative as I write this (2:30 EST) after staging a big early day rally. Most sub-indices, like retail and housing, are also red. BUT, the infamous “FANG” (Facebook, Amazon, Netflix, Google) stocks + Apple are up anywhere from .2% (AMZN) to over 3% (AAPL). These stocks are the largest stocks in the SPX by market-cap and are part of the “tool kit” the Fed has been using to keep the S&P 500 and Dow from spiraling lower.
Since late 2012, the Fed has been able to orchestrate the markets with heavy doses of direct and indirect interventionary tactics. It’s used a combination of money printing, plunge protection and propaganda to keep the stock market propped up, interest rates near zero and the price of gold suppressed.

But, if the action over the last four trading days are any indication, the Fed is increasingly losing its ability to control the markets. This is most evident in the apparent break-down in market sector correlations.

From roughly late 2012 through early 2016, the Fed has been the US$/yen as a “lever” with which to push the S&P 500 up and the price of gold down. If you study these three graphs, you can see the correlations from 2012 to 2016 and the breakdown of the correlations in 2016: Weekly $/Yen Weekly SPX Weekly Gold

I happened to notice on Friday and yesterday (Tues, Sept 13) that, despite a move higher in the $/yen (the yen falling hard vs. the dollar), which is the level the Fed had been using to manipulate stocks, the stock market experienced steep sell-offs. Typically the $/yen and the U.S. stock market move in near-perfect correlation. Today they are inversely correlated.

 

Full article at:

 

http://news-uncensored-fresh.blogspot.be/2016/09/fed-intervention-has-completely.html

 



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