Darshan's Blog

Darshan's Daily Market Ponderings

Monday 1st February, 2010

The media is clueless about the markets...

Afternoon all.Could the bear trap already be sprung? Seems it could be a few days earlier than expected perhaps? We shall see. All I know is that like I said last week, this entire move down is a set-up to create a catapult via forced short-covering. I read a report on the weekend (Huffington Post) - I won't even link to the article because the author clearly knows nothing about how markets work. Essentially her theory (Yes I won't even mention her name - please go find it if you must) was that Goldman Sachs and JP Morgan were involved in a mexican stand-off - via ex-JP Morgan star, Chariman of the Economic Recovery Advisory Board and former Fed Chairman under Carter, Paul Volcker proposing banking reforms and and the Goldman camp selling equities to try to get them to back down.

As I have said, I am not a conspiracy theorist. The essential fact is that JP Morgan and Goldman Sachs do both control the markets with their size but if you think they are involved in a mexican stand-off then you are sorely not understanding how things work. They are both institutions that work equally for the Fed and the Government. They work together. This entire move down is nothing to do with a mexican stand-off between the two of them. It's merely an engineered pull down in order to create a bear trap. This was explained in my blog last week. They need to do this to take the markets up, when the Fed starts removing liquidity over the next two months. This is the only way to do it.

Do you really think Obama and Volcker are suddenly just going to say "Hey the market is down, let's just forget about the prop trading desk reforms - on you go, carry on as normal!". Of course not. This is why I dislike the way the media sensationalises everything - I mean for an author of an article to start by saying "I am angry because my portfolio is down since the beginning of the year" - says it all.

If you were in the market on January 1st - then you deserve a reality check. I warned that the technicals were suggesting a correction but clearly, The Huffington Post has writers who would rather not get clued up about how markets work - they would rather write passionately about something just because it makes headlines. For today the markets are already breaking upwards. Despite the personal spending figures coming in 0.2% lower than expected, the market is just rising in the futures. There are a number of things that could happen here. We either have the bear trap idea taking off and now we head towards the final top towards 11250 on the Dow, 1200 on the SPX and 5700-5800 on the FTSE 100. Or we head north until 10300 on the Dow, 1100 on the SPX, 5300 on the FTSE 100 and then we come down for the final nasty move before the bear trap is set. We need to get today out of the way to see what the deal is here and then we can see what happens when those numbers above are hit. I am still going with the idea that Gold needs lower towards $1050 or even $1030 before it heads up again - so I think the second scenario above might make more sense and the bear trap hits us later this week or next. Though I will have a better idea by the end of today.I think the best weekly trading idea this week will have to wait until tomorrow. So I will keep you updated asap.For today - just stay out of the market or if you are in, keep your stops tight and trail your profits.

Have a great day!

Darshan

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