Veteran S&P Futures Trader: "I Am 100% Confident That Central Banks Are Buying S&P Futures"

Tyler Durden's picture

A Zero Hedge reader, and long-time futures trader, shares his views on the evolution of the "market", where it was, where it is, and where it may be going.

* * *

I have been an independent trader for 23 years, starting at the CBOT in grains and CME in the S&P 500 futures markets long ago while they were auction outcry markets, and have stayed in the alternative investment space ever since, and now run a small fund.

I understand better than most I would think, the "mechanics" of the markets and how they have evolved over time from the auction market to 'upstairs".  I am a self-taught, top down global macro economist, and historian of "money" and the Fed and all economic and governmental structures in the world.  One thing so many managers don't understand is that the markets take away the most amounts of money from the most amounts of people, and do so non-linearly.  Most sophisticated investors know to be successful, one must be a contrarian, and this philosophy is in parallel.  Markets will, on all time scales, through exponential decay (fat tails, or black swans, on longer term scales), or exponential growth of price itself.  Why was I so bearish on gold at its peak a few years back for instance?  Because of the ascent of non-linearity of price, and the massive consensus buildup of bulls.  Didier Sornette, author of "Why Stock Markets Crash", I believe correctly summarizes how Power Law Behavior, or exponential consensus, and how it lead to crashes.  The buildup of buyers' zeal, and the squeezing of shorts, leads to that "complex system" popping.  I have traded as a contrarian with these philosophies for some time.

The point here is, our general indices have been at that critical point now for a year, without "normal" reactions post critical points in time, from longer term time scales to intraday.  This suggests that many times, there is only an audience of one buyer, and as price goes up to certain levels, that buyer extracts all sellers.   After this year and especially this last 1900 point Dow run up in October, and post non-reaction, that I am 100 percent confident that that one buyer is our own Federal Reserve or other central banks with a goal to "stimulate" our economy by directly buying stock index futures.  Talking about a perpetual fat finger!  I guess "don't fight the Fed" truly exists, without fluctuation, in this situation.  Its important to note the mechanics; the Fed buys futures and the actual underlying constituents that make up the general indices will align by opportunistic spread arbitragers who sell the futures and buy the actual equities, thus, the Fed could use the con, if asked, that they aren't actually buying equities. 

They also consistently use events through their controlled media, whether bad or good price altering news, to create investment behavior.  The "ending" QE 3, and the immediate Bank of Japan QE news that night, and thus the ability to not quit QE using them as their front, and then propping our markets on Globex, like this is suppose to be good news, free markets totally dependent on QE, is one example.  Last night, Obama passing the amnesty bill, and the more great news about how Europe and now China are also printing money out of thin air and "stimulating" their economies with QE too, which in turn prompts the Fed to prop up overnight futures markets on Globex to make that look like great news as well.  I guess this is suppose to create a behavioral pattern for investors, that dependency on government gives us positive feedback and is good, much like Pavlov's dog and the ringing of the bell.

Why would the Fed prop up our stock market to begin with?  Weren't they just supposed to "stimulate" the treasuries market only, to keep interest rates low, indirectly, by an eventual direct purchase in secondary markets, keeping them propped up (for five years now!)?  Well, first of all as it relates to equities and utilizing the "Plunge Protection" mandate, why not just bypass the "plunge" altogether.  Can't the definition of Plunge Protection be just that?  Protection against a plunge instead of during a plunge?  Doesn't propping the market equate to "Plunge Protection" since propping alleviates plunge and "protects" us?  Does it depend on what the definition of "is" is?  And really, doesn't the Fed buying futures directly alleviate those bankers who take their money in TARP or however means and then this money doesn't make its way into the very heart of what the public deems as its consumption motivator, higher stocks and real estate?  Plus, buying futures is a means of then delivering fiat cash upon every expiration, therefore, "stimulus" to someone who receives it. 

The Fed boasts about having a printing press, and I guess this allows them to "fix" everything.  They "print money out of thin air" we keep hearing (which is true by the way) and with US taxpayer backing (fiat currency (always fails throughout history)), (perhaps post QE 3 there is an Executive Order for QE infinity), they sit on the actual bid and hold our treasury markets steady, and by buying out big sellers as they arise like Russia and China via their Belgium central bank franchise as an example, propping our dollar and then staying on that bid by other franchises, having constant bid flow into equity futures in real time hours and Globex overnite, all in order to retain US consumer confidence (since that is what we are suppose to continue to do) and the image of global strength to keep the dollar from losing its reserve status.  Their obsession of stopping a deflationary depression, has headfaked people like Bill Gross, formerly of PIMCO, and known to have started hedging long bond positions five years ago with the assumptions that Fed printing would be inflationary, and rates would move higher, but without the assumption of the perpetual direct bid in the market place by the Fed creating, "price discovery".  For now, that is.

In the end, which they know exactly when that is, the ultimate con is exposed through mass theft.  Americans finally find out what those guys on CNBC are talking about when they mention "inflation" and how it destroys buying power over time.  The end reflects the Fed stepping away from the bid in all markets.  Prior to this, of course, they prep their offshore fund accounts to take the other side and short dollar, short global equities, and short fixed income, with mass leverage for maximum gain.  I mean, why wouldn't they?  They are a private entity and are composed of non-US citizens with no accountability or oversight and they seem to be globalist humanists with a depopulation bent (Rockefeller Foundation). Why wouldn't they use our money to prop, their money to take other side in a massive global short play, then let it all crash by simply stepping off the bid of these markets.  They can then use the controlled talking heads who can relay the complexities of fiat money, index arbitrage, money velocity, currency and CDO swaps, with some geopolitical China worries, whatever, but really emphasize that the whole capitalistic system and constitution was flawed to begin with anyways, and that perhaps totalitarian fascism would be best for the country at this point since everyone's wealth is destroyed overnight and are literally hungry.  Perhaps Obama is just that person!  Maybe Dinesh D'souza was right about Obama.  This is the way to destroy us, or "equal" the playing field globally by taking us down to third world status, is it not?  Leverage the American people's money by trillions of dollars at the tops of capital markets, then bury them in a death spiral?  Maybe Thomas Jefferson knew what he was saying' "If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered."  

Why wouldn't anyone believe these words written here?  Perhaps you can't imagine someone being so evil?  Wasn't the Federal Reserve Bank concept initially funded by a Rothschild in the 1800s, who used the media to deceive the public and sway the London Stock Market down negatively, who then speculated against that panicking public's sell orders by taking long positions in stocks, then making a fortune when everyone found out that the news was wrong and positive?  Then later another Rothschild founded our Federal Reserve in 1913, and others like JP Morgan who supposedly bought the US stock market in a banking panic and "saved" America in 1909?  Aren't all of these Fed owners Fabian Socialists?

Details of this last market move:

This last 1900 point Dow Jones push upwards - and the Ebola events leading into it - it was so orchestrated and heightened at critical points but the ascent and push straight up in price, and sideways nonreaction after was completely unlike anything I've seen before.   After going up for a record breaking amount of time the last five or so years, in a nonlinear exponential mania type of ascent, there should normally be tremendous volatility that follows.  But, this isn't a tech-like mania!  There aren't any buyers here other then the Fed.  The shorts were all squeezed in 2009, 2010, 11, 12, and everyone who has ever wanted to buy stocks is in! 

Modern Portfolio Theory has reached it's pinnacle, leading 55% of the American public who partake in that "diversified" portfolio theory off an eventual cliff. The market acts more like a penny stock that has been pumped up and is "boxed" (boxed, meaning, the whole float is buying and holding and held with the promoter, one broker dealer, and thus this one broker dealer can control price "discovery"(regardless of actual fundamentals and using "press releases" to sway and create order flow they want and need from naive clients)) , and less like a free market.  The Dow runs up that much that quickly, then on Globex its down .02 percent at the most over night, multiple days in a row?  No pullback?  Are you kidding me!?  Then the actual trading days have very little volume, and the peaks in price intraday also exhibit nonreactions sideways, just a couple of tics from the highs.  This price manipulation reflects that they want to expunge all shorts on all time scales, to the point that there will be no point to try, and at the very end, there will be very few.  This also reflects that a group of very smart prop trader types, experienced behavioralists, perhaps off of a prior prop desk like a Goldman, are controlling this game, and not some government treasury/cftc/sec "plunge protect" type who doesn't understand this game. 

With the indoctrination of Modern Portfolio Theory, and the masses' epistemology from experience and from "experts" to never ever get out because "it always comes back", and from corporate buybacks, the actual intraday trading float has disappeared, thus, easier and cheaper to manipulate and find the perfect "price discovery" for every situation to control investor behavior, especially during off hours on Globex.  This past situation, during the break and runup, there would be thousands of opportunities for the Fed insiders using different variations of ways to front run (without using the focus dump then pump futures contract itself), making the HFT guys front running for pennies look like complete chumps.  Can you imagine all the different ways to bet the global markets at the height of the ebola scare, which just happened to be the height of the mass media hammering the public with fear about it(haven't heard a word since!), which happened to be the exact moment of a very large Dow Jones 600 points intraday range after falling 1000 points in 9 days, which also happened to be at the height of put option premiums expanding and call option premiums eroding quickly, by knowing that the Fed is now going to prop it back up, way back up, and quickly!  Shorting put premium globally for expiration in 7 or 37 days?  Buying way out of the money cheap calls, buying the underlying equities, shorting interest rates, buying inflation, buying emerging markets and all of their liquid securities, options plays etc...  on and on.  That prior knowledge ts worth trillions, is it not?  We all know that investment bank broker dealer desks take the other side of trades, and inventory the other side opportunistically.  Why wouldn't this "bank" too, especially now that they are intertwined with investment banks thus have gained their intellectual property in trading?  And why wouldn't they influence our idiot sheepish politicians to mandate the Fed Reserve, to encourage the Fed Reserve, to stimulate, whereas our Fed could use that for "the people", while at the same time, for themselves take the other side based on their offshore opportunistic mandate?  Today's current markets are completely manipulated, every market, all the time, with our money and political Keynesian (control) mandate doing the manipulation in order for their money to front run and profit from there opportunistic mandate. 

So if I am right, and my 23 years of experience trading equities, during manias enables me to know with certainty that I am, that they are allowed to directly be involved and have a perpetual standing bid in the secondary derivatives markets, they can then take the other side when they want (no need to publicly announce this, but to justify in their own heads).  So when they take the other side in the public markets upon themselves pulling the prior US citizen backed bids in all markets for the ultimate 80 year cyclical "end game" (btw, about 23 years past the Kondratief Cycle deadline which is one way to describe the inevitable delay in this ongoing natural economic system reset) of the US fiat backed paper print con capped off by mass leverage, wouldn't they make trillions on the bubble pop on the way down?  Wouldn't they also end up eventually owning the whole US since commerce would halt immediately, everyone would lose their jobs causing mass deflation (and hyperinflation due to our currency being booted as reserve currency, and imports becoming expensive overnight) causing mass defaults on their home loan obligations?  Where do our mortgages end up now post 2008, 2009 financial collapse?  Our governments coffers via FHA, FNMA, GNMA?  And who will place a lien on our government when they default on it's loans?  Wouldn't they be able to foreclose on America? 

The US mandate on allowing Plunge Protection enabling the Fed to stick their noses directly in the equities markets was written in 1988 and is public knowledge and found in the public forum.  And the attached "memo" shows incentives from the Chicago Mercantile Exchange for Central Bankers to use their equity futures markets. 

Write me if you have any questions or comments, or if you need me to join in your efforts help to expose this Ponzi scam. 



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order66's picture

This has been obvious for months.

Right form the point that the CME directly created incentive programs for Central Bank order flow.

It is 100% obvious that they are also selling the VIX.


SilverIsKing's picture

Through the use of my crystal ball and my recently refurbished time machine, I've been able to determine the precise date the Fed will stop buying S&P futures.

This date is...

Haha...the joke's on all of us. Never.

Arius's picture

really i do not see what the problem is, they are buing sell it to them and get out ...


besides, they also want to make money the old fashion way ... earning it fair and square in the stock market ...

Bindar Dundat's picture

The FED is  buying because they represent wait, let me change that. They are buying because..they represent the banks who own the FED?

And your also right they are earning our money the old fashioned way -- they are stealing it.

Arius you are just so sarcastic.

Peter Pan's picture

It looks as if the central banks are buying S & P futures but what they are really buying is just a little more time. 

Liberal's picture

Forget these silly conspiracy BS and lets talk about the most crucial issue of our time: Bill Cosby is a racist! Oh, he's a rapist? Whatever! Let's just talk about it all day everyday for awhile!

Richard Chesler's picture

Viewing our history in retrospect, it taxes the imagination to realize that a young and fertile land, filled with such an energetic and ingenious people, should have been betrayed so long to the connivings of those who were non-producers. How utterly incredible that debt-merchants, with nothing but their fictitious reserves, and their usurped power to create interest-bearing debt, could so long systematically bilk a nation without an outraged citizenry making them disgorge their unearned wealth and unearned claims!


NoDebt's picture

Future historians will refer to this era in markets/finanace as the "Steroid Era".  Everyone is cheating and everyone knows everyone is cheating.  Nobody wants to admit it because the home run count is through the roof and the ratings (also manipulated) are at all-time-highs.

kliguy38's picture

greenspun admitted on a twentieth anniversary documentary on the 87 crash that they bought futures the next day to stem the OF COURSE they are still propping this up the same way..........and they will certainly pull the plug one day........

palmdetroit's picture

Funny but not news,...

Miss monetizing FB? new competetor -get in early

Stuart's picture

And I am 100% confident that this S&P trader is 100% correct!

max2205's picture

If 535 people let them it must be ok.......oh wait

OW My Balls's picture

I'm 100% certain that the [unidentified] ZH reader referred to is francis_sawyer, because central banks, as a particular subset representing entity, & cloaked in the promise & guise of 'employment & price stability' technocrats, are ACTUALLY, at the core of the onion, just 'run of the mill' [INSERT ASYMMETRICAL DEMOGRAPHIC OF YOUR CHOICE HERE].

glenlloyd's picture

"really i do not see what the problem is, they are buing sell it to them and get out ...

besides, they also want to make money the old fashion way ... earning it fair and square in the stock market ..."


This is way beyond the mere buying / selling of equities. The consequences of intervention on this scale will be huge, and not limited to just the equities markets.

The idea of intervention at all is so contrary to free markets (not that we truly have them) but it destroys any notion that we have a fair and equitable system. This is cronyism on a grand scale that will create a path of destruction like none we've ever seen before.

Arius's picture

"The idea of intervention at all is so contrary to free markets"


says who?  glen Lloyd? well glen sorry, i do not agree with you and fully support the FED's action to support the market. 

What are free markets anyways?  Anybody knows?

firstdivision's picture

You don't see the problem with the Fed buying with money that they 'create' then send the bill to the American citizens?  You do realize that money supply expansion also leads to commodities having rising prices?  Look at the YoY cost of food and utilities.  That right there will show you that they are robbing the current and future generations of resources so that they can point and say "Look stocks are doing great, so smile!".  The massive problem lately is the diminishing returns that are occurring, so much so that it takes an exponential amount of money creation to maintain the current valuations (FRB/BOJ/BOE/ECB/PBOC playing circle jerk the QE), let alone raise them (we're going parabolic 

All this is being billed to us and future generations.  Current generations are suffering, lack of rising wages with rising expenses, also with the fixed income being smashed to zero income, older generations are having to choose between accumulating debt or eating.  Future generations are all being robbed of resources they will need while we consume and destroy to keep this current illusion of 'consumption utopia'. I do believe we are nearing the end of the 'CB experiment' (ticking time bomb here .

If you still see no problem you are either an idiot, or a central banker. 

Arius's picture

I dont think I am an idiot, although I enjoy my box of chocolates ... but look in the mirror, you might find him there ...

TheReplacement's picture

I say, at this point, let them conjure up confetti and buy all they want to buy.  We are in no way obligated to pay the debt they are running up nor are we obligated to let them retain any of the real assets they are buying on false faith and credit.

These are the actions of the privately owned Federal Reserve.  They are not mine nor yours.  They are responsible and so they must be treated appropriately.

booboo's picture

The problem with your theory of "We are in no way obligated to pay the debt they are running up"

Morally you are 100% correct but there are no mooring lines attached to this ship.

and you won't have a say in the matter. If you manage to stay alive you will be forced to pay for it. There is no where to hide. South Americans will eat gringo's and you will be begging for a room at the FEMA INN.

As a side note the U.S. deer, squirrel and rabbit population cratered during the last depression as they were a staple in the American diet.

cowdiddly's picture

You don't see a problem? Let me make it simple for you. They print the money out of thin air to buy that 113 dollar share of apple. And they want to sell it to the next sucker like you for 120 dollars. What did you have to do to earn that 120 dollars? Pure profit raping that does not cost them one dime and absolutley zero risk.  Money printers thus could care less if the price goes down or not, only that they find a willing buyer to pawn it off on.Fuck their stock market.

Arius's picture

calm down ... the country and the world needs the capital markets

cowdiddly's picture

This is not  capital  nor a market.

adr's picture

No it doesn't. Without the "market" the global economy would revert to a system of creating real value and reward honest hard working individuals instead of con asrtits and those who wish to not work for wealth.

ebear's picture

Intentionally obtuse.

PiratePiggy's picture

Don't gruber me, bro.


Divided States of America's picture

Big Mo here wants to get nail gunned here...but i totally agree with ya

mpath's picture

The question that I think is more important to ask-how did Woody Dorsey predict the top before Ebola weeks ahead-and then the bottom 3 weeks before?

Yes, this market is rigged-but maybe the master planners are turning things the way they want them at sentiment extremes-both on the greed side as well as fear.

Take a look-the full reports are open to the public.

Headbanger's picture

So what!

The Feral Reserve wasn't able to stop the selling late October buying S&P futures

It took Bullard's bullshit and Abe's slashing the Yen to do it!

But now that's been played out along with China cutting deposit rates.

So no can do next time the """market""" takes a dump.



insanelysane's picture

Did it take Bullard's bullshit and Abe's slashing to do it?  Or were those actions a means to provide rationale for what was going on in the markets?  For entertainment purposes, look at CNBC and Bloomberg's headlines for why the market is up to day (every day).  There is some tidbit of information that it put out there to explain to the masses why the market is moving.  I, and I believe the author would agree, that the market is being moved, and then an explanation is produced to explain it.

Headbanger's picture

Yeah no shit the """market"" has been manipulated ad nauseam for years now

But they're scam is played out as far as it can go and they know it's about to implode into the abyss now.

Oh yeah!  I'm feeling the wrath of the pom-pom cheer leader boyzzz now...


IndyPat's picture

I think he covered that...
They know when it will implode....because they have the implode button.

Did you catch the part about about the super dry humping via shorts after flipping the switch?


As if the Fed bought bonds and nothing else. LOL!!!

Ignatius's picture

Right.  File under "Duh'.

rccalhoun's picture

at least the japanese asdmit to buying stocks---whats with that?    total desperation?????

firstdivision's picture

The Fed hasn't bought shit, it's that Belgium guy with access to infinite amounts of money *wink* *wink* *mother fucker*. FYI that mysterious "Other Assets" (equities futures contracts) line item pretty much all but disappeared, though it is starting to expand again

Its_the_economy_stupid's picture

It is 100% obvious that they are also selling the VIX.


Non predictive for a long time.

fzrkid's picture

Blah Blah Blah..


When does it all happen so I can shaaawt  the sheat out of the maaahhkit?

Exponere Mendaces's picture

I'd be more believing if he had given his trader badge acronym and clearing house number. Otherwise, anyone could've written that claiming to have been on the S&P 500 Pit steps. I know he gave part of his name, but again, it would help to have the full picture.

saints51's picture

You read articles from a fictional character named Tyler Durden. What's the difference?

I thought it was a great article. What the author has done is broke the game played in a type of 101 or basics for the new folks.

TheReplacement's picture

And that is the difference.

The message is more important to you than the messenger.  Truth over all.

For the other guy the messenger is at least as important as the message. 

You guess which one describes the majority.

saints51's picture

I know buddy , I know. This is why some of us know we are on a deserted island while majority are in denial and still believe they are at a high end resort. Then when shit hits the fan they want our stash we have been preparing for thinking they are still entitled.

Exponere Mendaces's picture

Funny, all it takes is some dude saying "I was THERE man, listen to me" and you're all over it.

No wonder the USA is going down the tubes, too many rubes around.

Captain Willard's picture

It could be foreign Central Banks buying. The Swiss central bank has admitted buying US small cap stocks. Why not SP500 futures? Surely they don't want to keep holding all the Euros they've been buying. The Bank of Japan could be doing the same thing just for diversification purposes. 

But outright purchases of equities is the sort of Rubicon that they would only cross in a very extreme situation. I'm not saying they haven't done it before. In fact, I'm guessing they have. Occam's Razor suggests that it would be easier these days just to continue QE than buy equity futures outright at these levels. 

So here's a more juicy possibility: Have foreign (German, Japan, Swiss) Central Banks pledged/shorted their Gold against long equity positions? 

SHRAGS's picture

Central Banks Load Up on Equities By Sarah Jones   Apr 25, 2013 10:34 [Bloomberg]

HedgeAccordingly's picture



StandardDeviant's picture

That's fine, until the music stops.

Lionhearted's picture

The question is why? My guess is that they are cranking it up so they can short it and make a fortune on the way down when the buy and holds are all scrambling to sell their long positions as they lose their shirts to the same people who fooled them into pumping all their money into the market. Granny can eat dog food even though she contributed to the market indexed retirement fund all her life just like she was told to do. Save your money. Put it in your 401K and one day you too can wait for your "paper loss" to be made up by the market "coming back". "It always does." Hope you live long enough to get your money back. But don't count on it.