No Mo’ PoMo?

http://www.theburningplatform.com/?p=54088

What is POMO?

http://youtu.be/Ibxw95ZC97I

Grand Unified Theory of market manipulation

http://www.precisioncapmgt.com/wp-content/uploads/PCM-A_G.U.T._of_Market_Manipulation.pdf

There is much speculation and anecdotal information regarding the rally that began March 6 2009, which have suggested the gains are the result of massive manipulation on the part of the Federal Reserve (FR) and the large institutions that dominate Treasury securities dealing, program trading and the derivatives markets. Traders have reported that traditional indicators and metrics used for market analysis stopped working for periods of time or altogether, and that correlations among markets have been erratic and quick to change. Record program trading by Goldman Sachs as reported by the NYSE, heightened focus on high frequency trading (HFT), outsized profits by the large and well-connected banks, along with unprecedented intervention by the FR in the markets only fuel the manipulation speculation.

The POMO Effect
The theory for which we have the greatest supporting evidence of manipulation surrounds the fact that the Federal Reserve Bank of New York (FRNY) began conducting permanent open market operations (POMO) on March 25, 2009 and has conducted 42 to date. Thanks to Thanassis Stathopoulos and Billy O’Nair for alerting us to the POMO Effect discovery and the development of associated trading edges. These auctions are conducted from about 10:30 am to 11:00 am on pre-announced days. In such auctions, the FRNY permanently purchases Treasury securities from selected dealers, with the total purchase amount for a day ranging from about $1.5 B to $7.5 B. These days are highly correlated with strong paint-the-tape closes, with the theory being that the large institutions that receive the capital injections are able to leverage this money by 100 to 500 times and then use it to ramp equities.

PPT and POMO

Get familiar with these acronyms. PPT = Plunge Protection Team, which I've blogged about a few times already (use the Search function and type in "Plunge Protection"). POMO = permanent open market operations. Central banks (especially the Fed) are intervening and manipulating markets in an attempt to maintain orderly flow. These attempts will eventually fail in spectacular fashion as the manipulation distorts and creates rolling bubbles in various asset classes.