Alistair Gilbert 30 th September 2010 S&P Comment

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1 by Alistair Gilbert 30 th September 2010 S&P Comment As you know, I study technical indicators, utilise Gann, Elliott Wave and Fibonacci to try and show you TIME and PRICE patterns for when I believe markets are topping or bottoming. I have 30 years experience of this. The last 12 months have not been easy as invariably it feels like there is a hidden force at play to prop up the market and stop well known indicators working. Today we hit my target, identified last week, of 1158 (we hit ) then immediately plunged to 1136 within an hour or so when mysterious buying came in yet again. Tonight I am going to reproduce two very enlightening articles that were published yesterday (one was kindly linked by Rob last night on the Bulletin Board). I feel you should all read them. I think that what is happening is disgusting and will eventually lead to investors abandoning the market, as it is a false market, where government abuses its powers to con the people that all is rosy. All is not rosy. America is going through a financial implosion with towns and states that are bankrupt, with banks and financial institutions whose liabilities are kept off the balance sheet (approved by law) because otherwise they too would be seen to be Copyright 2010 Alistair Gilbert September 2010

2 insolvent. These financial abuses are not limited to the US as Europe has produced similar fudged bank stress tests, but I believe that the US is the only one manipulating markets (because they know all other major markets follow Wall Street). Even though it is legal, and thus not technically fraudulent (because they pushed through laws to authorise it), I believe that it is obscene and will end very badly eventually. The first article below, from Phoenix Capital Research itemises what the FED is spending to prop up this market. The second article by fellow analyst Rick Ackerman explains what keeps the market up when directors of companies are selling 1411 shares for every one that they buy the highest SELL to BUY ratio ever The ONLY Reason Stocks Have Rallied This Month Submitted by Phoenix Capital Research on 09/28/2010 The Fed generally claims that it stopped its first Quantitative Easing (QE) program back in March 2010 and that there were no additional debt monetizations between then and the announcement of its QE lite program in August. Yet, as I ve proven time and again, the Fed has continued to monetize Wall Street s debts EVERY options expiration week since QE 1 ended proving beyond a doubt that the Fed s QE program did NOT actually end in March. Here s the chart of the Fed s recent actions for those of you who haven t seen this before. Options expiration weeks are in bold. Week July 22 July 15 July July June Fed Action -$8 billion +$8.6 billion +$1 billion -$13 billion +$175 million Copyright 2010 Alistair Gilbert September 2010

3 June June June May May May May April April April April $12 billion -$4 billion +$2 billion -$16 billion +$14 billion +$10 billion -$4 billion -$1 billion +$31 billion +$420 million -$6 billion You ll note that the Fed ALWAYS made its largest capital contributions during options expiration weeks. Heck it pumped $31 BILLION into the system in April 2010, just ONE MONTH after it claimed QE 1 ended! However, since that time the Fed has pumped a total of over $65 billion into Wall Street on options expiration weeks. On non-expiration weeks the Fed either withdraws money or makes small money pumps. This pattern finally ended in August 2010 when the Fed failed to pump the system on options expiration week. But then again, why bother? The Fed was about to announce its QE lite program in which it would use the interest on maturing securities to purchase Treasuries from Wall Street Primary Dealers via its Permanent Open Market Operations (POMO). I realize that last sentence is a lot to take in. So let me explain how this new QE Lite Program works before we continue. During Treasury auctions there are 18 banks, called Primary Dealers, who are given unprecedented access to US Debt (Treasuries) in terms of pricing and control. These are the BIG BOYS of finance including firms like Goldman Sachs, JP Morgan, Bank of America, Credit Suisse, and others. During its QE 1 Program, the Fed bought over $1.0 trillion in securities from these firms. Its new QE lite program consists of it using the interest and proceeds from the securities in its portfolio that are maturing to buy Treasuries from the Primary Dealers via Permanent Open Market Operations (POMO). Copyright 2010 Alistair Gilbert September 2010

4 In simple terms, the POMO actions allow the Fed to pump money into Wall Street (by buying Treasuries from the Primary Dealers) without DIRECTLY monetizing Treasury debt (the Treasuries had already been issued). The Primary Dealers then take this fresh capital from the Fed and plow into stocks, forcing the sort of ramp job we saw last week on Friday. All told, the Fed has bought $20 billion worth of Treasuries in this fashion, $11.15 of which it purchased last week alone. With this kind of weekly money pumping in place, Bernanke and pals don t need to continue their behind the scenes games (like the options expiration week money pumps). Or do they? Unbeknownst to most investors, last week Ben Bernanke pumped an additional $11.05 BILLION into the system ON TOP of the $11.15 pumped via the POMOs. In plain terms, the Fed juiced the system by $20+ billion in a single week, bringing its liquidity pumps RIGHT BACK QE 1 LEVELS. If you want to know why stocks have rallied in the last month, this is THE reason. The economy isn t improving and the European Crisis isn t over. Nothing has improved. All that has happened is the Fed funneled money into the Primary Dealers who ramped the market. This is also the reason why the latest rally has almost entirely consisted of gap ups: the Primary Dealers ramp the market and then the computer trading programs take care of the rest. Copyright 2010 Alistair Gilbert September 2010

5 In plain terms, the market is being juiced higher, plain and simple. There is no fundamental reason for stocks to be rallying. Moreover, we have numerous signs of a top forming (mutual fund cash levels, insider selling to buying ratios, negative divergence, etc). Those who choose to buy into the farce of a rally are going to get what s coming to them. And when they do, it won t be pretty Unequivocally, we have reached a watershed in the history of the U.S. stock market and therefore global stock markets. Never mind whether traders or investors are making money or not; the stock market has now become nothing more than a casino where the table almost always wins. Business-news channels in the USA are nothing more than offshoots of Hollywood sitcom studios which 20 years ago would have been rejected for children s TV as being too dumbed down. The U.S. stock market has become so far detached from reality that justifiably it cannot be called a stock market. Those of us who believe that one of the best ways to keep proper tabs on the financial charade is by perusing the consistently accurate touts in Rick s Picks should spare a thought for those still bogged down in ancient trading methodology, such as Elliott Wave analysis, that began life when the stock market was indeed a market. A trading/investing friend of mine had 24 years in a row of profits until 2009/2010, when his proprietary trading method failed dismally. During the last 18 months, Bob Prechter has had more wrong calls than the Shanghai telephone exchange, and Dr. McHugh likewise. (I must point out that I have great respect for both of these men they are still as clever as they always have been, it is just that the rules have changed). What Hindenburg? Copyright 2010 Alistair Gilbert September 2010

6 It even looks like the otherwise invincible Charlie Nenner has got the top wrong (some say he is a secret agent of Goldman Sachs, but he does get it right 90% of the time). There are so many charting indicators (i.e., no fewer than six Hindenburg omens) that say this market should be collapsing but it isn t so far. To cap it all, the infallible and rare VIX Bollinger signal almost two weeks ago signaled down, down, down, but in fact we have gone up, up, up! Meanwhile, the latest figures reveal that U.S. corporate insiders are selling 1411 shares (!) for every share they re buying. Undoubtedly, this market will not go down until Da Boyz are totally overwhelmed by some kind of trigger event that sets off a chain of events that will see the legs of their table collapse. It will be a flash crash of immense proportions rather than a stair-step decline. The only thing that is still favorable to Main Street is low interest rates, so when they start to rise, that will most likely be the trigger The ideas expressed in this Report are the thoughts of Alistair Gilbert and represent part of the intricate process that he goes through before arriving at a trading decision and as such are like a trading diary. Alistair Gilbert is not an authorised investment adviser and as such none of his statements should be construed as investment advice. The value of investments can go up as well as down and trading is very high risk. Readers are advised to consult with their own investment advisers who may be better qualified to offer a trading strategy based on your own individual circumstances. Copyright 2010 Alistair Gilbert September 2010

Alistair Gilbert 21 st June GOLD REPORT

Alistair Gilbert 21 st June GOLD REPORT www.alistairgilbert.com by Alistair Gilbert 21 st June 2011 Email : Alistair@AlistairGilbert.com GOLD REPORT Earlier this year there was much fanfare that Gold had closed out 2010 at higher levels than