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September 6, 2009S&P Futures/ETFs Being Used to Ramp up Equity Markets - Market ManipulationEvidence from Intraday Trading Profiles

As any day-trader (still left with money to trade) would tell you, these days there is someextremely suspicious activity going on in the equity markets. For the last few months, onseveral occasions the equity markets have ramped up in a matter of minutes, on no newswhatsoever and on extremely low volume. Talking bubbleheads, would like us to believethat buoyed by the prospects of a V-shaped recovery, money that has been on the side-lines (retail investors, money market funds, mutual funds, hedge funds and pension funds)is moving back in, causing the market to ramp up.We however would like to seriously challenge this thesis by presenting evidence to thecontrary from intra-day trading profiles. In our intra-day trading profiles we have observedseveral days when stocks move up in a synchronized fashion with

exactly the sameintraday ramp up pattern

.Case in point being Wednesday August 19, 2009, which was largely a no news day except,for a U.S. Treasury POMO at 11 am to buy back ~$2.6bn of Treasuries. On this day in theovernight markets the Shanghai Composite had dropped 4.3%.On the back of the China news, the markets started Wednesday with an initial sell-off of about 9 points on the S&P. However soon after the UST POMO ended at 11am, there was a

massive

ramp up in the S&P index such that it closed the day up 7 points. What is mostintriguing is that the pattern of the ramp (as shown encircled in the intraday profiles below)was

exactly the same

across a large number of stocks! How is this possible? Stocks cancertainly trend up, but if retail investors or mutual funds were buying at the very least thepattern of the ramp up

should be different for different stocks

Chart 1: S&P 500 ramp up (August 19, 2009)

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Chart 2: Same ramp pattern seen in SPYChart 3: Similarly in FedEx - used to gun up Dow Jones Transportation IndexChart 5: Smaller but same pattern in U.S. Steel

3 http://firecracker-report.blogspot.com

Chart 6: Similarly in REITs example here of Simon Property Group

For stocks to exhibit exactly the same pattern ramp up - some entity(s) has to have boughtthe entire index. On Wednesday August 19, the S&P ramped up from an intraday level of 988 to 998 in 30 minutes. This 10 point ramp up implies an increase in the S&P 500 marketcap of approx. $120bn! Even though this is a massive sum of money, such a ramp up iseasy to engineer using the index futures market where margin requirements are so low thatyour leverage can be 80-100x. So for a $120bn move in the S&P, your futures marginaccount can have as little as $1.2bn (assuming 100x leverage).Bob English at The Precision Report has done some excellent work analyzing the E-mini S&P 500 futures to chronicle the late day tape painting that has become a common feature of

the NY Fed’s POMO days.

For the new reader who is

not familiar with the NY Fed’s

POMO(quantitative easing operations where they are pumping $1.75 trillion into the system bybuying back US Treasuries, MBS and Agency debt), The Precision

Report’s

A Grand UnifiedTheory of Market Manipulation is a must read. In additionZero Hedge has also diligently chronicled unusual buying activity in SPY ETF, by large Wall Street banks.

Conclusion

For the last few months, The Firecracker Report has witnessed several such intra-dayramps. Each time the market is gunned up using S&P futures/ETFs, with the same intra-dayramp pattern repeating across stocks.It is thus amply clear that the Index Futures/ETFs are being used to rally the markets. Theequity markets are

NOT

going up based on fundamentals of demand and supply. Retailinvestor/mutual fund money chasing stocks is

NOT

the reason markets have been going up.

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S&P Futures/ETFs Being Used to Ramp up Equity Markets - Market Manipulation Evidence from Intraday Trading Profiles

As any day-trader (still left with money to trade) would tell you, these days there is some extremely suspicious activity going on in the equity markets. For the last few months... (More)

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Upload Date:	09/08/2009
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