Rumor Versus Fact: An Insider's Report On A Manipulated Market

Tyler Durden's picture

Full expanded blow by blow of today's action from the CBOT via pitnoise.com.

Rumors Vs. Data

Well, well, well, today was an interesting day indeed.  It was a tug-of-war of sorts, with apathy pulling against very…VERY…bad data.  Luckily for the fearless apathetic lot amongst us who couldn’t care less about cascading sovereign debt defaults on the world’s doorstep and increasingly horrific job losses, a hero emerged.  Someone started a rumor that one company among the tens of thousands listed on the exchanges would be buying back shares – a stock split – and the market E X P L O D E D.

As an example, the March S&P futures gapped open much lower due to the poor economic data (coming later) and quickly put in a low at 1084.70.  From there the high frequency traders (HFT) took over and churned the markets back and forth slowly for the entire morning and early afternoon session, thus keeping fear at bay.  Additionally, when the market did swoon a bit, Golden Slacks supported the market by buying large size in the big S&P pit.

In the early afternoon it hit like a mad PPT trader masquerading as a legitimate agent of the NY Federal Reserve: MASSIVE BUYING!  Within minutes the S&P500 along with the other major markets took flight and quickly rallied 1%.  Had a rate cut followed the recent rate hike?  Was the recent horrific economic data revised by the BS artists at the BLS?  Nope – the market took off because it was rumored that AAPL would split its stock 4:1.  Yep.  A rumor.  A *^%$#!G rumor!  About 30-minutes after the short covering carnage started AAPL denied the story…and the market proceeded to ADD to its gains. 

When the S&P500 came upon the 3:15pm close, the market had settled negative, but hardly.  The rally was good for 17.50 points from the low equating to a 1.6% reversal.  And in case you didn’t know, a 1% market move equates to well over $100 billion in market capitalization.  Therefore, this amazing move tacked on ~ $180,000,000,000.00 to the US (non-rigged) market cap.  How nice.

Oh, did I mention this was based on a RUMOR…an UNFOUNDED RUMOR?  Not to worry though folks – you can bet your bottom dollar that the fellas on Fraud Street weren’t about to let a massive rally fade away to nothing.  After the initial period when AAPL denied the rumor and the market churned around 1097.00, then the market went even higher. 

Said another way, Fraud Street kept the gains based on a known FALSE rumor…and then…wait for it….wait for it…I G N O R E D the real news of the morning.  It was a well timed replay of the Greek bailout rumor of Feb. 9th.   How healthy is this market if its best moves are 100% fabricated bull$#it?

I have another question or two: Who benefited from this other than Goldman Sachs?  I wonder how many magical S&P500 at-the-money calls were purchased moments before the explosion?  I wonder if the SEC will investigate?  Would the Lame Stream Media ignore this if a false rumor triggered a 1.6% rout?  OK, I know the answer to the last two – and it’s no.

So what caused the market to fall apart before the open?  Oh, nothing really.  Hmm, let’s see here; we have Greece on the verge of bankruptcy due to a further credit downgrade, the guaranteed spread of this sovereign debt disease to other EU countries, the guaranteed disintegration of several large EU banks, political & social unrest, a fake durable goods data point, and another so-called surprisingly bad weekly jobless claims data point.

Who is surprised by any of this worse than expected bad news?  Oh yeah, only economists.  We covered that yesterday.  Way to go fellas – another EPIC FAIL at the guessing of the weekly data.  (I’m sure glad my Dr. doesn’t “guess” when he treats my ailments.)
“Equities slumped early as the cost of insuring against default on Greek government debt rose a fourth day on concern ratings downgrades will cut the nation’s access to European Central Bank funding.” You can bet on it.  “Greece has to repay more than 20 billion euros ($27 billion) of maturing bonds and bills by the end of May, according to data compiled by Bloomberg. A Moody’s downgrade may make it harder for the nation’s banks to fund themselves by making Greek government debt ineligible as collateral for European Central Bank loans.”  You can bet on that too.

The Durable Goods report got major headlines from the Lame Stream Media about how bullish the number was.  This is only the case for the headline number.  Responsible for the good headline number was a 126% increase in civilian aircraft orders (these orders can be cancelled, by the way).  Outside of transportation, orders fell 0.6%. Core capital equipment and machinery orders dropped 2.9% and 9.7%, respectively, which are the important ones that determine the direction of the economy.  For all of 2009, durable goods fell a record 20%.  But don’t worry, it “could have” been worse.

Later we find out that economists had expected weekly jobless claims to be 460,000.  It was a surprising 496,000.  Now I’m not a high-falutin’ economist, but I think the latter number is a lot worse than the former.  Let me grab a calculator here…YEP, sure enough – it’s worse.  But some market watchers only pay attention to the four-week moving average to get around the occasional problem of large weekly data.  Yeah, umm, no help here either: this number has risen by 30,000 to 473,750 in the last four-weeks.

But hold on to your hats – what’s this? A rumor you say?  To hell with the facts – buy, buY, bUY, BUY!!!!

With that said, you can see from the attached trading results today we follow the trend, not the news, and NEVER the so-called experts.  In the end we faired well.  However, everything printed here are unmitigated FACTS and you need to know them.  When the day comes that the markets cannot pump up an insane rally on pure nonsensical rumor, but rather sells off on the bad news, at least I can say I tried to warn you.  This market is sick.

To be sure, that day will come.  Its date, however, is unknown.

Trade well and follow the trend, not the so-called “experts.”

via www.pitnoise.com

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gunsmoke011's picture

LOL -- Will the SEC investigate? Of Course They Will -- They Are Here To Protect ALL Investors and Insure A Transparent Market. It's Just part Of Their Job To Look Into These Types of Matters -- That Is Of Course If They Can Be Worked In With All Of The "Top People" From The FED Who Will Be Looking Into GS and Their Greek Activities. The "Looking Into Matters" Waiting Room Will Be Quite Crowded

geopol's picture

Yes, The Creme De La Creme of gumshoe investigators will be eyes open while you sleep... GS Has no chance.....

 

Cuban cigars for everybody...

 

Voluntary Exchange's picture

These folks are already rich beyond most people's dreams. Why wouldn't they want total control of everything?  Why wouldn't their strategy be BUY EVERY DIP FOREVER, because they want it all, and they want us all groviling for anything to live: food, a home, a job, medical care, medicine.

If money is no object, the object is control, then it will be the same game till they have virtualy everything.

 

Thoughts?

Anonymous's picture

Heh, heh, if they're buying it all, they
sure are overpaying.

35Pete's picture

Because they're aristocratic sociopaths that really do want to return to feudalism? 

Look, these people think that THEY own the Earth, and that we're merely a virus, a flock of useless eaters that are destroying their pristine lakes, forrests, oceans, ect. 

We're using up THEIR oil, their farmland, and their base materials. 

Can't have a republic. Can't have it. Can't have it. Can't have it. The cattle need to be controlled. And the best way to do that is deny the herd grain. 

It's pretty much that simple. The aristocracy is calling the shots, based on their best interests. And you are NOT their best interests. 

velobabe's picture

ZH tops out at #10. but the listing was alphabetical.

Ten Wall Street Blogs You Need to Bookmark Now Wall Street Journal.

carbonmutant's picture

It's not the mandate of the SEC to investigate people doing God's work.

Anonymous's picture

This is my first post here guys so please bear with me.

I'd like to know what you all make of this:

http://www.federalreserve.gov/releases/h6/Current/

I have been following this site's Thursday 4:30pm weekly postings religiously for over a year.

Take a look at Table 3 - M1 Currency - we are close to a record (seasonally adjusted) at 866.4 Billion and also close to a record (non-seasonally adjusted from Table 5) at 869.8 billion.

Couple of questions:
1. How much really does it say here that the currency in circulation is increasing? The FED "prints" money in other ways with purchasing their own bonds, etc. but is this still a key indicator?
2. If this page or statistic means a lot, might Goldman Sachs get their "insider" hands on these reports before the 4:30pm after market posting?

Anonymous's picture

The SEC is nothing more than a bunch of idiots.

macfly's picture

The market may be sick, but your journalism, and the tone of your commentary is superb. At last news I can rely on, you actually make arranging the deck chairs seem ok, and the water isn't even looking so cold anymore. The band is playing sweetly, and we're all going down together. 

 

By the way, server was glitchy and slow this am, no doubt because everyone with a brain cell has realized this is the place for the real news.

 

Keep up the great work - thank you!!

Missing_Link's picture

Hey, it's all about the trend.

As long as you know the trend, you can make money.  For example:

The Titanic hits an iceberg.  It tilts 45 degrees.  Chairs slide down the deck.

See those chairs sliding?  That, my friend, is a trend!

Booyah!  BUY BUY BUY!

carbonmutant's picture

"Hey, it's all about the trend."

That and a tweet from above.

Eally Ucked's picture

What if at the moment you buy, buy, buy they start sliding up deck and go over the board on other side? Miracle!!!

colorfulbliss's picture

That truly explains what I'm seeing out of the corner of my eye as I browse through the daily headlines over the past 2-3 weeks...chairs sliding up the deck. Is it just me, or has reality completely left the room this month? I go to Bloomberg, scan through the headlines on the left(which I'll venture to guess are spun more positively than is warranted), then scan through the numbers on the right, then wonder if every thing I have ever learned is for naught. Seriously....I'm really creeped the fuck out. For the last 1 year +, I have been angry. In the last couple of weeks the anger has become fear. When I can no longer make any sense of my surroundings, I can no longer make myself believe I have any ability to see what is coming around the bend. Is anyone else experiencing anything like this?

Tripps's picture

yes, i'm experiencing the same thing and i trade for myself almost daily

 

it means we need to go to CASH very soon. same thing happened in 1st half of 2008...nothing was making sense...market rallying on all time highs in oil and commodities day after day even though economy was in recession

 

you should be in fear right now. i am. the market has lost completely all sense...i see it now.......for what its always been. a game...except now its 110% phschology and BS...i wouldn't doubt a 50% correction one this non-sense is over and the true economy collapses again

jwthomps's picture

What if most of the  real money that

once supported the market has been

destroyed and now the market and

much of the economy only seem to

exist due to fake regulation and

Fed liquidity?

 

Winisk's picture

You no longer trust your environment.  Stress and anxiety is a natural reaction.  Perhaps you should consider reframing your perspective to enjoy 'living in the now'.  Let go of any false sense of predicting the future and control.  Stress kills.

Reflexivity's picture

+1

This is really a clever comment.  It's 50% sarcastic and 50% true...and the other half is funny.

"You no longer trust your environment.  Stress and anxiety is a natural reaction."

Does anyone else here feel (at least in part) the same way?  That the more that time marches on (for whom the bell tolls, anyone?), then the less you trust the environment?

Look, there's no real problem with rational self-interest.  But, when the majority of market participants are shysters, what's an honest capitalst gonna do?...besides hold his or her cash/earnings on the sideline?

Live in the now, indeed.

 

35Pete's picture

That's called a contrarian play. 

gigit's picture

fucking fantastic -- well said

DavidC's picture

gunsmoke011,
Even if the SEC DID investigate it (as if they will...), the move has happened and they won't undo it unfortunately (I was out for meal with friends and was flat, so I lost no money on it).

Tyler, question - if it was purely a rumour, why has there been no later sell-off? The overnight Dow (here in the UK) is UP another 30 points or so, I would have thought a sell off would have occurred.

DavidC

Brett in Manhattan's picture

Tyler,

When will you figure out that these things: rumors, economic indicators, announcements by Bernanke etc., don't move markets?

They are RATIONALIZATIONS for market movements.

Everyday, the financial media feeds us some bullshit for what moved the market. This week it was Consumer Confidence Reports, Employment Numbers, and Bernanke. Next week it will be something else.

But, in reality, it's just the most powerful exchange members maximizing their profit potentials.

Missing_Link's picture

When will you figure out that these things: rumors, economic indicators, announcements by Bernanke etc., don't move markets?

 

They are RATIONALIZATIONS for market movements.

Ding ding ding!  We have a winner!!!  Please step forward and collect your prize!

Anonymous's picture

True enough!
The media would only become indignant if somehow the Repub party was somehow benefiting. Otherwise, move along, nothing to see here...

35Pete's picture

The phony left-right paradigm will keep you stuck inside the box. 

You'll never figure anything out until you are willing to entertain unpopular perceptions. 

Fidel Sarcastro's picture

If I may be so bold as to speak for Tyler, I'm sure he knows they are "rationalizations" for market moves.  

The market makes the news, the news does not make the market.

The well timed rumor caused a massive short covering rally that was obvious to anyone who bothered to look.  (Yes, I took advantage of it all the way up.)

So it wasn't "just a rumor" and it surely wasn't "just GS," it was mainly (imo) short covering followed by trend/momo traders, etc.

And why wouldn't the market reverse when the rumor is known to be false?  Come on, this is Wall Street we're discussing - why would they give up the gains?  Who cares HOW it got there they'd say...it's there (a new level).

 

Anonymous's picture

Rationalizations?! Damn. I thought they were tactical cover.

Cognitive Dissonance's picture

"When will you figure out that these things: rumors, economic indicators, announcements by Bernanke etc., don't move markets?

They are RATIONALIZATIONS for market movements."

Except when the entity moving the market is also creating the cover story, or what you call the "rationalization" for market movements. I agree that many talking heads are simply coming up with reasons for this or that.

But the big boys actually do manipulate the markets, usually under cover of some rumor or story or whatever. Plausible deniability is the name of the game.

spekulatn's picture

This market is sick.

 

Outfrigginstanding post, Mister Larry.

Grandpa Bear Hug's picture

Hey Mary Schapiro, define market manipulation

 

The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

 

Today’s equity trading got off to a rough start given the less than stellar core economic released prior to the official open. As most traders expected, the equity market commenced selling during pre-market and continued its weakness until around 12:25 pm.

 

At this juncture the S & P 500 futures launched and brought the rest of the equity market along for the ride. The "financial news outlets" a.k.a. CNBC noted that the launch of equities coincided with a rumor hitting the trading floor that Apple Computer was going to complete a 4-1 stock split.

 

As usual, the rumor was later rejected by Apple Computer however now that the robots trading the market entered the stratosphere, the market proceeded to kick in the after burners for another leg up.

 

Grandpa is curious if Schapiro and your band of selective incompetent enforcers deem market manipulation solely when the market goes down?

 

The SEC managed to implement a new short sale ruling which would indicate you have a bias to the upside given the fact the market has many issues that one could argue are not “natural”.

 

Let me help you out with a few examples of “peculiar upward biases to the market”:

 

Options expiration week (funny how the market tends to head north during the 3rd week of every month)

 

End of the month “window dressing”

Holiday shortened week “window dressing”

End of the quarter “window dressing”

End of the year “window dressing”

Mid-day rumor "window dressing"

 

I believe I spend more time researching than you Ms. Schapiro as I do what I can for my family in an effort to generate a fair living trading this unregulated, insane market. Who would have thought that "maintain fair, orderly, and efficient markets" was nothing more than barnyard fertilizer.

 

My best to everyone as this market has become nothing more than a prop for a 3rd sequel to I Robot.

THANK YOU ZERO HEDGE AS YOU ARE TRULY THE BEST!

plocequ1's picture

There are no longs, There are no shorts, There is no SEC, There are no investors, There are no nations, There are no Peoples, There is no Law.. There is only Goldman Sacs. Why does everyone beleive the SEC is going to save the day. Its over folks. The Cancer is too far gone.

truont's picture

Pitnoise should not question the Plunge Protection Team.

They are doing "God's work."

assumptionblindness's picture

The SEC won't investigate because they are "all idiots over there"

lsbumblebee's picture

Hooray! More money for those in control.

I keep thinking of the millions of unsuspecting people with 401K plans. When the Goldman Sachs maggots are finished, they are in for a traumatic shock.

ZerOhead's picture

And a hell of a ride with impending increased volatility.

Up... down... up... down... like a schoolyard bully holding the nerd by his ankles shaking the lunch money out of his pockets.

When the kid (market) is finally dropped to the ground... BB and Timmay will rush in to assist the TBTF's with trillions in cheap loans to buy everything... 'saving' the markets and enriching themselves in the process...

Hyper-inflation can then begin.

msjimmied's picture

Nice visual that...Up down..the don't think sprayed darjeeling is good for keyboards! :-)

geopol's picture

As I have said before,,

 

This is one continuous creeping coup of insurrection against the constitution and law from beginning to end!!!!

Good luck with general strikes,,,,this country has no stomach for it..

 

Anonymous's picture

Unfortunately, I can not tell you what data I have access see, where I work, or what my role is, but I will tell you this. The market is being manipulated and our country is being ruined. Where the he!! is the SEC? Where are you? Are you stupid or is this being done with your OK? Does the central banks want this market up so badly they are willing to let wall street rip everyone off in the process?

mouser98's picture

the central bank is owned by those who are manipulating.  its no secret.

abalone's picture

It's only a rort if you're not in on it

geopol's picture

Australia or New Zealand?

geopol's picture

Hello my friend,,

Steve Keen told me that the housing market is, shall I say on fuck street, In Aussie,, keep your head low.

 

abalone's picture

G'Day cobber....most diggers down here think we've been vaccinated for what's coming over from the ol'USofA...Australia's mortgage market is the be all & end all for most folk here...anyhow's like most ZH folk I'll keep trying to short the Mother F...er out of this market until pay day arrives

Anonymous's picture

How many blog entries do we need that say the same thing? Everything in this post can be found in today's earlier entries, and probably in more well-written ones too. And still no clear marker on the front page that this is a GUEST POST. Too many Tyler Durdens != quality control.

Anonymous's picture

Obama proposing to freeze forclosures is what jacked the mkt in the late afternoon.

assembler's picture

Google news search for Feb 25, 2010 says:

Your search - obama foreclosure - did not match any documents.

lovejoy's picture

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahuuwBS8KYq8&pos=2

 

Feb. 25 (Bloomberg) -- The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.

The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.

“It is one of the many ideas under consideration in the administration’s ongoing housing stabilization efforts,” Treasury spokeswoman Meg Reilly said in an e-mail. “This proposal has not been approved and there are no immediate planned announcements on the issue.”

She confirmed the authenticity of the document, which hasn’t been made public.

At present, lenders can initiate foreclosure proceedings on any loan that hasn’t been submitted for HAMP eligibility. Under current HAMP rules, foreclosure litigation can proceed while borrowers are under review for the program or even in a trial modification.

The proposed changes would prohibit lenders from initiating new foreclosure actions before loan screening by HAMP and would require lenders to halt existing proceedings for borrowers once they are in a trial repayment plan.

Anonymous's picture

Hi all,

just started reading this blog and am glad ive found it.

i spent some time trading a few years ago and did ok for myself but found i lacked the capital to make a decent return for my time. im looking at re-entering the trading sphere (with a definate downside bias)and there seems to be a lot more sites/blogs/info online then there used to be.

If anyone has a favoured site for tips, discussions, blogs & commentary they use (aside from ZH) id love to hear of it and would appreciate the heads up. Seems to be plenty of switched-on traders & participants here so id like to know what sources you all use. if anyone would like to hit reply to this post just with some site names or links (no obscure midget fetish p0rn though thanks, ive got plenty already) that'd be really appreciated.

oh yeah - i've always preffered swing & trend trading to trying to pick up minor subdaily movements, (i always found that too fast, volatile and unpredictable on high leverage) if that helps..

cheers, matt.