Momo Follows POMO Till There’s No Mo

Share!Tweet about this on TwitterShare on FacebookShare on LinkedInEmail this to someonePrint this page

View PostI_Am_Madness, on 07 January 2011 – 12:16 PM, said:

Doc,
Over the last 3 weeks and with all this pomo juice, S&P is only up 15 points. That’s just a tad over 1%.
The meat of the move happened BEFORE the actually announcement between the August Lows and early November.
My guess is, the folks that front run the move are simply unloading it to the fed now at 20% higher.

*easy money*

The move began when the Fed began pumping POMO in August under QL 1.5. QE2 in November was just an add on. SPX added about 100 points under QL1.5 and about 75 so far under QE2. Diminishing returns are setting in. The FCBs and the banks have been the stumbling blocks since then. Tracking these flows is the crux of the analysis in the Fed Report. Money talks, and the Fed’s pumping of $25-$30 billion a week into Primary Dealer trading accounts has a big mouth.

This is a slice of the chart in the Fed Report that shows the correlation between the cash the Fed supplies to Primary Dealers and the stock market. The blue line is a representation of the POMO. The cyan line is the SPX. POMO began to turn up in the beginning of August. QE2 in November just augmented that. Note the diminishing returns. That’s a result of the FCBs and banks holding their noses and stepping away. Actually the banks are sucking wind, but that’s a whole nudder story.

Posted Image

I should note that this correlation has worked since I began actively tracking it in 2002. Cause and effect at work. The dealers own the casino and the Fed finances it. They decide the direction the game will take. Everything else is a sideshow.

Stay up to date with the machinations of the Fed, Treasury, Primary Dealers and foreign central banks in the US market, along with regular updates of the US housing market, in the Fed Report in the Professional Edition, Money Liquidity, and Real Estate Package. Try it risk free for 30 days. Don’t miss another day. Get the research and analysis you need to understand these critical forces. Be prepared. Stay ahead of the herd. Click this link and get in RIGHT NOW!

Leave a Reply