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Leading Indicators Predict Another Fed Intervention (Or EPS Rediscovers Gravity)

Tyler Durden's picture




 

For the last couple of decades, ECRI's leading indicators have provided a reasonable early warning for rising and falling forward EPS estimates. With the ECRI growth rate hovering near the July 2010 lows, having fallen considerably recently, it seems that either intervention (the new normal) will come in the form of QE3 (as it did the last time we were here in Q3 2010) or EPS estimates will start to collapse notably (in line with yesterday's perspective on the rolling-over of forward EPS expectations).

While we would not be surprised to see QE3 around the corner, it would seem a tough spin given recent GDP prints and the exuberance in equity markets and so perhaps (as we have been so clear about) we need an EPS flush-fest mark-down in stocks again as the opportunity for Bernanke's Put to get its strike shifted upwards. It is relatively clear though that incessant interventionist policy has once again broken valuation metrics and made reality harder and harder to discern.

h/t John Lohman

 

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Fri, 10/28/2011 - 11:37 | 1820992 GeneMarchbanks
GeneMarchbanks's picture

Just a little one? A mini qe maybe.

Fri, 10/28/2011 - 11:39 | 1821001 bernorange
bernorange's picture

Fed members have been hinting at QE3 for the last week or so.  It is inevitable.

http://www.pmbug.com/forum/f4/qe3-looming-32/

Fri, 10/28/2011 - 11:49 | 1821038 SheepDog-One
SheepDog-One's picture

Fed members have been hemming and hawing about QE rumors all year, now the rumor of QE is as good or better than QE itself...yet all we see is markets melting up 25% in a couple weeks back to near all time highs. Never any need for QE, just talk about it is good enough here in Fullretard Land.

Fri, 10/28/2011 - 11:51 | 1821061 Everybodys All ...
Everybodys All American's picture

You have been right before on your QE calls. What do you think? Do they really need to at this point? My feeling is they hold off.

Fri, 10/28/2011 - 11:53 | 1821070 SheepDog-One
SheepDog-One's picture

I think before and now that theyre basically done, next while everyone is expecting their funds and 401K's and pensions to keep getting padded by the FED, some overnite we'll see they staged some event and grabbed it all.

Fri, 10/28/2011 - 11:54 | 1821078 baby_BLYTHE
baby_BLYTHE's picture

Sheepdog is right about the effectivness of the almighty 'hint'. Here are words from the printer himself...

the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services (stocks).

Fri, 10/28/2011 - 11:53 | 1821073 sjamesje
sjamesje's picture

All time highs are up around 14k for the Dow.  Still have a ways to go before we get there.  Would expect a never before seen crash i we do get there though!

 

Fri, 10/28/2011 - 12:24 | 1821233 sabra1
sabra1's picture

google the graphs from the 1929 recession, to the 1932 depression. everyone thought all was getting better, then BAAAAAM!!!!!!!

Fri, 10/28/2011 - 16:08 | 1822401 css1971
css1971's picture

5 years of shit then WW3

Fri, 10/28/2011 - 20:19 | 1823235 Hephasteus
Hephasteus's picture

Which reduces the complexity of the society and then baby boomers come pouring in flying out of vaginas complicating it right back up.

This time I don't think people are coming back. Ever.

If people want to experiment with continually constructing and then corrupting and then destroying complex societies let em have at it.

Fri, 10/28/2011 - 11:47 | 1821046 mayhem_korner
mayhem_korner's picture

 

 

Why QE when QE hinting levitates sheep so well?

We don't need force...just the threat of force will do...

Fri, 10/28/2011 - 13:03 | 1821380 Rynak
Rynak's picture

Because of a little global debt and insolvency problem.

By now, this no longer is just about levitating the stockmarket (which has nothing to do with the economy) alone anymore.... sure, banksters would love to get even more, but by now, their profits aren't the only thing that matters anymore.... but also the (unrealistic) survival of an unsustainable system.

Printing will happen..... and shortly afterwards, there will be revolts across the globe.

Fri, 10/28/2011 - 13:09 | 1821415 brew
brew's picture

where's robo trader when you need him...

Fri, 10/28/2011 - 11:48 | 1821051 Mark123
Mark123's picture

Don't the primary dealers have the capacity to create almost unlimited amounts of debt anyways...QE1 left them with a lot of reserves sitting at the Fed no?  All the Fed has to do is make it clear to PDs that they will backstop them in case things don't go so well, and then they can go shopping for assets!!!!!!!!!!!

 

So I don't think there will be any more official money printing for quite a while.

Fri, 10/28/2011 - 12:46 | 1821302 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

That's like saying, "I'll just put it in a little bit ..."

Fri, 10/28/2011 - 18:19 | 1822929 nyse
nyse's picture

Right. Just the tip...

Fri, 10/28/2011 - 11:38 | 1820998 Irish66
Irish66's picture

no way will they even attempt qe3

Fri, 10/28/2011 - 11:48 | 1821048 markar
markar's picture

Really? Not only will the Fed print but so will the ECB. There is no other way out for them. gold to the moon

Fri, 10/28/2011 - 12:35 | 1821265 junkyardjack
junkyardjack's picture

Exactly, what other option do they have? Default? The only thing there is to do is to print its just when will they do it.

Fri, 10/28/2011 - 21:57 | 1823406 buyingsterling
buyingsterling's picture

What about the $16 trillion the fed loaned out to banks, which has not been paid back? Why won't banks just exchange that 'money' for treasuries? Their 'balance sheet' would not be affected. The fed has already juiced the system, the 'money' is just waiting to be securitized.

Someone tell me why this is wrong, because it seems to obviate much of the talk about QE3 (not that the effects won't be similar).

Fri, 10/28/2011 - 22:56 | 1823566 buyingsterling
buyingsterling's picture

Come on, someone here understands this stuff. Is this $16 trillion irrelevant, and will it sit on the sidelines? If it's irrelevant, why hasn't it been returned? Thanks in advance.

Fri, 10/28/2011 - 15:58 | 1822360 Smiddywesson
Smiddywesson's picture

If a 50% haircut can be called something other than a default, printing can be called something other than printing.  And they are doing a hell of a lot of not printing already (and that's just what we know about)

Fri, 10/28/2011 - 11:56 | 1821089 jcaz
jcaz's picture

QE3 is already underway- the value of the Dollar tell you all you need to know....

Fri, 10/28/2011 - 11:58 | 1821101 abugarance
abugarance's picture

why so mate? sure thing they will,

Fed's mandate: drive all americans to utter poverty, force savings rate to zero in order to fund food bills and petrol expenditure, keep yields on saving at zero so that everyone eats into capital

Fri, 10/28/2011 - 12:03 | 1821128 topcallingtroll
topcallingtroll's picture

PEOPLE SHOULDNT JUST AUTOMATICALLY HOARD THE MOST LIQUID ASSET OUT THERE UNLESS THEY LIKE BEING PUNISHED OR THEY ARE ESPECIALLY STUPID.

people should "save" in all sorts of financial instruments including bulk used books.

Fri, 10/28/2011 - 11:39 | 1821002 GhostTrader
GhostTrader's picture

So where is the top in this rally, guys?

Fri, 10/28/2011 - 11:44 | 1821027 mayhem_korner
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If you denominate equities in gold or silver, you might ask "when's the hole in this boat going to get patched?"

Fri, 10/28/2011 - 12:00 | 1821109 rosiescenario
rosiescenario's picture

.......you'd be waiting for the captain of this Exxon Valdez to sober up first and notice he was taking on water....

Fri, 10/28/2011 - 12:05 | 1821139 topcallingtroll
topcallingtroll's picture

I will consult Mr. Bollinger and let you know when.

Fri, 10/28/2011 - 11:40 | 1821009 Captain Benny
Captain Benny's picture

I still think that yesterday was an attempt to burn remaining shorts and bears before a big downside flush out in the coming weeks.  The rally was massive on nothing concrete and just another kick down the road.

Fri, 10/28/2011 - 11:44 | 1821026 Mark123
Mark123's picture

Are you saying that Unicorns are not concrete?  How dare you!

Fri, 10/28/2011 - 11:47 | 1821040 Captain Benny
Captain Benny's picture

France, Germany, and Greece all seem to believe in unicorns just like the Norwegians believe in trolls...  If you ask me, there is a troll hiding under this bridge coming up in November.

Fri, 10/28/2011 - 12:18 | 1821200 JohnG
JohnG's picture

Houblonmonstres.

Fri, 10/28/2011 - 12:25 | 1821237 topcallingtroll
topcallingtroll's picture

You are behind the times.
We dont live under bridges any more,
and we are all hoping Santa comes early.

Fri, 10/28/2011 - 11:42 | 1821015 undercover brother
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by hook or by crook, all downside movement and especially downside momentum must be eliminated from markets and anyone daring to report negatively, or actully short the markets, shall be punished to the full extent of the fed reserve bank.  so sayeth Bernankenstein.

Fri, 10/28/2011 - 11:54 | 1821080 SheepDog-One
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Or so they want everyone to think that downside has been eliminated.

Fri, 10/28/2011 - 11:42 | 1821017 Irish66
Irish66's picture


China Construction Bank says Chairman Guo Shouing has resigned

Fri, 10/28/2011 - 11:47 | 1821044 jdelano
jdelano's picture

whoa.  Really?  That doesn't bode well.  

Fri, 10/28/2011 - 11:50 | 1821058 Irish66
Irish66's picture

can't wait to hear why

Fri, 10/28/2011 - 16:01 | 1822371 Smiddywesson
Smiddywesson's picture

To spend more time with his family no doubt

Fri, 10/28/2011 - 11:54 | 1821084 Irish66
Irish66's picture

http://www.businessweek.com/news/2011-10-28/china-state-bank-chiefs-quit...

There is gonna be a great story about this.  I can feel it

Fri, 10/28/2011 - 12:03 | 1821126 rosiescenario
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.......buuuut Barton just told us China is just doing fine......Guo should have talked to Biggs before he took that step, obviously Guo doesn't know what is really happening....

Fri, 10/28/2011 - 11:42 | 1821018 Mark123
Mark123's picture

Must, get, european, markets, to close green....dear God push those computers harder you son's of bitches!

Fri, 10/28/2011 - 11:43 | 1821021 mayhem_korner
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What is the right-hand (EPS) scale - YOY change?

Fri, 10/28/2011 - 11:50 | 1821055 FOC 1183
FOC 1183's picture

Yes

Fri, 10/28/2011 - 11:53 | 1821071 mayhem_korner
mayhem_korner's picture

 

 

 

Thx

Fri, 10/28/2011 - 11:45 | 1821031 YesWeKahn
YesWeKahn's picture

Fire the mad man and end the mad bank.

Fri, 10/28/2011 - 11:45 | 1821036 defn8Dog
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With quarter-end window dressing now the norm, I was wondering whatever happened to T+3?  By that measure, the Q ended on Oct 26, to allow for settlement, but in the last several quarters, it seems frantic trading happens right up to the last day of the month.  Are managers including those positions regardless of the settled date? 

Thanks, dfn8

Fri, 10/28/2011 - 13:09 | 1821419 Panafrican Funk...
Panafrican Funktron Robot's picture

Opex seems to trump just about everything else regarding trading decisions at this point.  Weeklies/monthlies affect things much more than they did a couple of years ago.

Fri, 10/28/2011 - 11:51 | 1821059 tliberty
tliberty's picture

Thanks for the post. It's the snake eating its tail. One intervention leads to another, and so on and so forth. I think it is safe to assume that the State will intervene in the market whether or not it is "neccesary." It is like a kid in a candy shop that has knocked the shop owner unconcious.

http://www.golddeputy.com/

Fri, 10/28/2011 - 11:52 | 1821060 Caviar Emptor
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Austerity for 99%. Prosperity for the 1%. 

That, in essence, is the policy going forward: big cuts in benefits like health, education and retirement in the context of declining real incomes and net worth. But the paper economy? Boom-times. And QE is simply a stimulus for the paper economy aka banks aka Wall Street aka 1%ers which also has a goal of keeping prices rising.

That's Biflation, chillun'! Booya!

Fri, 10/28/2011 - 11:57 | 1821095 SheepDog-One
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Yea it is biflation, both the inflation and deflation crowds have it wrong, in a way. Inflation in everything you need to survive, deflation in everything you count as an asset, except for a few certain things like PM's.

Fri, 10/28/2011 - 11:59 | 1821104 topcallingtroll
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I agree it is boom times for paper, at least for now.

I believe gold is abput thirty percent overvalued compared to a lot of paper out there including EWZ.

Fri, 10/28/2011 - 12:06 | 1821120 Caviar Emptor
Caviar Emptor's picture

Gold is the opposite of paper: it's the floating life-preserver on the rising tide of paper aka inflation. It follows and tracks the loss in buying power as it has for hundreds of years documented. 

Gold is the only antidote for biflation. Interest rates will continue to be negative, stocks are dollar-equivalents that will lose ground as buying power drops in the face of rising fixed costs in the economy (rising cost of living and doing business). Real property, well,......

Fri, 10/28/2011 - 12:09 | 1821163 topcallingtroll
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Like all things that have value it will go through periods where valuation changes occur in relation to other things of value.

Fri, 10/28/2011 - 12:10 | 1821174 SheepDog-One
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Then consider the very real event where they take their ball and bat and say the peasantry is no longer allowed to dabble in PM's.

Fri, 10/28/2011 - 12:24 | 1821234 Caviar Emptor
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Then your physical would go through the roof since everyone on the black market would want it. And foreginers would smuggle it in along with their drugs

Fri, 10/28/2011 - 13:53 | 1821635 gdiamond22
gdiamond22's picture

Gold is setting up for a HUGE move lower in the next 2 weeks. If not early next week.

Fri, 10/28/2011 - 16:07 | 1822396 Smiddywesson
Smiddywesson's picture

Based on what, the dollar reaching the bottom of the channel?

Fri, 10/28/2011 - 11:52 | 1821066 SDRII
SDRII's picture

What do they say about Al Qaeda and revisiting their kills. Anniversaries are important, allegedly. Ergo the Oct 19-29

Fri, 10/28/2011 - 12:12 | 1821178 SheepDog-One
SheepDog-One's picture

I think we'll soon see a very different plan enacted than this perpetually pumping stocks thru series of money printing events, we'll get another 'terrorist attack'. Needs to be a lot more scary than 9-11 though, watch out for it.

Fri, 10/28/2011 - 16:27 | 1822477 NoClueSneaker
NoClueSneaker's picture

Yupp, same shit here - NWO riot police all over, just wanking- they need some action.

Infrastructure consolidates ( spying on citizens ), every fuckin' week we see amphetamine pumped weirdos scarrying the kids on the crossroads ... ( I do have respect for the german police, but they're crashed, decimated, the whole structure destroyed and outsourced - and replaced with thugs )...

So,

Those friggin' Islamists have to move their asses ....  SA need some exercise ...

Fri, 10/28/2011 - 11:53 | 1821072 undercover brother
undercover brother's picture

it occurs to me that since dr. bernankenstien can't actually outlaw shorting in the US like they do in those other socialist countries, he must figure the next best thing would be to punish them severely by using the power of the fed. makes sense to me.

Fri, 10/28/2011 - 16:09 | 1822406 Smiddywesson
Smiddywesson's picture

That is, and always has been, the game.  It is just more blatant today then ever before.

Fri, 10/28/2011 - 11:53 | 1821075 The Axe
The Axe's picture

Should we add CHOP to the ZH Muddy Waters list of fake Chinese companies listed in the US?  

Fri, 10/28/2011 - 11:55 | 1821085 peekcrackers
peekcrackers's picture

Old bernanke had a farm E i E i O .. on  his farm he had some sheep E i E i O

with a Qe here and a bail out  there .. Here a FEd There A FED everyhere a FED FED.

Fri, 10/28/2011 - 11:55 | 1821086 Tense INDIAN
Tense INDIAN's picture

when is the next FED meeting and how important is it??

Fri, 10/28/2011 - 12:22 | 1821221 JohnG
JohnG's picture

Nov 1-2, very.

Fri, 10/28/2011 - 11:56 | 1821090 topcallingtroll
topcallingtroll's picture

Looks OWS marked the lows of this next intermediate cycle.

(I am somewhat sympathetic to ows though)

Fri, 10/28/2011 - 12:02 | 1821117 Everybodys All ...
Everybodys All American's picture

I was thinking the same thing today. A little too orchestrated.

Fri, 10/28/2011 - 12:13 | 1821184 SheepDog-One
SheepDog-One's picture

Well 1 thing is for sure, Wall St sure isnt intimidated by  OWS at all.

Fri, 10/28/2011 - 12:43 | 1821295 topcallingtroll
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There was about a week it was making them nervous.

Fri, 10/28/2011 - 11:58 | 1821098 Randall Cabot
Randall Cabot's picture

This came to me the other night after a double Glenlivet on the rocks:

 

His name is Ben Bernanke

He's the head of the Federal Banky

He loves thin air

cause there's money in there

And from Nathan he gets a big thanky.

 

 

Fri, 10/28/2011 - 12:00 | 1821112 midgetrannyporn
midgetrannyporn's picture

I suspect we have witnessed QE3 already in the form of direct market intervention this month. Price fixing I believe they called it in the FSU. QE4 is up next as surely as the sun rises from the east every morning.

Fri, 10/28/2011 - 12:11 | 1821170 undercover brother
undercover brother's picture

Yes, i'd agree with that assessment.   my contention, unfounded of course, is starting in the beginning of the October, huge amounts of dollars were printed by the fed and loaned to european banks to shore up their balance sheets, a QE.  Judging from the spike up in the eur/usd cross, which lead this entire move, those dollars were converted into euro.  This in turn sparked yet another historical equity ramp courtesy of government intervention.  im just sayin'

Fri, 10/28/2011 - 12:15 | 1821192 SheepDog-One
SheepDog-One's picture

True, but where is the benefit in just pumping stocks in perpetuity? Got to be pumps and dumps or theyre just playing with themselves, putting + signs on their own paper. Looks pretty, but does nothing.

Fri, 10/28/2011 - 12:23 | 1821217 midgetrannyporn
midgetrannyporn's picture

Even if only temporary a fed financed stock rally helps hedgies and bankers paint the tape. It also makes some people feel better going into the xmas shopping season.

Fri, 10/28/2011 - 12:56 | 1821336 undercover brother
undercover brother's picture

The benefit the stock market received from the converting of massive amounts of dollars into euro was strickly an unintended consequence/benefit and a by product of the devaluing the dollar.   seems to me the feds ultimate goal is to float the market for as long as possible until the fundamentals and sentiment can float it on their own. 

Fri, 10/28/2011 - 12:05 | 1821141 rosiescenario
rosiescenario's picture

The move in pm's yesterday seems to confirm it.

Fri, 10/28/2011 - 12:08 | 1821159 SheepDog-One
SheepDog-One's picture

Companies earning less, so we need QE? Wait I thought QE was something completely different...now I guess its 1 size fits all.

Fri, 10/28/2011 - 12:12 | 1821181 Snakeeyes
Snakeeyes's picture

No kidding. It was preordained regardless of the economic numbers.

http://confoundedinterest.wordpress.com/

Fri, 10/28/2011 - 12:14 | 1821186 Debtless
Debtless's picture

Nothing can be permitted to collapse any more - it's all in the interest of national security. Invest accordingly.

Fri, 10/28/2011 - 12:16 | 1821196 SheepDog-One
SheepDog-One's picture

What this is really called is 'conditioning'....for what though?

Fri, 10/28/2011 - 12:18 | 1821203 common_sense
common_sense's picture

Hummmm... the top in this rally is...when we all will be dead...with our short positions very very low...

Just, some more months of "fucking bullish market", and when everybody will start to buy again massively, they will manipulate news again with merkozy, berlusconi, barroso...AND oohhhh the market crash? oh yes, but nobody will expect the market crash if everyone will be bullish. Mmmmm.. at FED they don't care, nor ECB, BoE, BoJ, BoCHina, only play for them and to ruine us, this is their Free market game, not logical, but lucrative for Bankers.  This is REALLY VERY VERY VEEEEEEEERY FAR FROM A "REAL FREE MARKET", BUT THIS IS WHAT WE HAVE, RESIGNATION.

Fri, 10/28/2011 - 12:29 | 1821243 sabra1
sabra1's picture

isn't it possible to have one HFT short the market, the other to go long? the short HFT gets unplugged at 3:30!

Fri, 10/28/2011 - 12:29 | 1821247 marcusfenix
marcusfenix's picture

In my humble opinion it's more a question of when then if . Assuming (which I know can be a stupid thing to do) the Fed and the PTB's want to keep the ponzi going for as long as possible, they will have to print eventually. look no further than yesterday's rally to see that the addict markets respond to even the rumor that somebody, somewhere is going to inject fiat crack into the system and rocket to new "highs" while the fundamentals, common sense and basic maths tells us the world is still basically fucked in the economic sense. I think since QE2 ended we have seen proof positive that the markets have become wholly dependent on and irreversibly addicted to stimulus. it's schizo behavior of raising almost exclusively on rumors of further easing or bank recaps or any other from of cash injection, then stagnating or falling of the cliff when that is in question is pure addictive pathology. once again the meaningful data hardly seems to matter any more, just look at today, markets are stuck in the red now that the eurofix is in question, even though that "fix" is highly questionable as to what good it would actually accomplish in terms of solving the EU debt crises even if it were implemented.

In the end this is not surprising because it all boils down to one simple thing: debt

there is to much of it in the system, and it is growing with a life of it's own, a juggernaut no longer able to be controlled by those institutions that created it. so the system that nurtured this monster, gave it vital breath and freedom to expand is now being destroyed by it, Frankenstein dying by the hand of his own mad science. QE, bailouts, stimulus ect. is really in the end, just the morphine used to ease there own passing, to comfort themselves while everything else crumbles, it's how the PTBs insulate from the real world.

unfortunately the rest of us don't have the benefit of such potent distractions, we are stuck in the real world that the beast they created is now destroying...

 

 

Fri, 10/28/2011 - 12:36 | 1821270 Dr. Nancy
Dr. Nancy's picture

 

All that's happening is predictable, as there are 7 stages that any major economy goes through. Those who know how it works profit & massive wealth is transferred to them. You can see what one millionaire has to say about the 7 stages countries go through & how you can profit like the ultra-rich during these tough times. His free video

"How To Create Wealth in Today's Economic Crisis"  is at:

http://theelevationgroup.net/presentation/register.php?a_aid=160667&a_bi...

Hope this info helps everyone as much as it has me.

Dr. Nancy 

 

Fri, 10/28/2011 - 12:57 | 1821311 gwar5
gwar5's picture

Dr. Nancy, I won't be available for the webinar invite, so please be so kind as to just post your Cliff Notes and save us the trouble. Thanks so much!

Fri, 10/28/2011 - 12:51 | 1821327 gwar5
gwar5's picture

Preserving the wealth effect illusion is apparently a full time job these days for the FED.  I'd also watch the EURO and if it slides down, the USD must chase it with QE3.

 

Fri, 10/28/2011 - 14:01 | 1821683 dcb
dcb's picture

i have s and p top at 1300, but where we are now is critical resistance, hate todays action, I'd prefer going down to go up again. "cover the gap" don't forget that the first break out is usually the head fake, so this one bothers me. of course the market isn't manipulated (joke) a few weeks ago when the futures were so high we sold at least back to baseline, now we drop a bit and ramp up the whole day. not going back to baseline and then going up.

 

imagine if ben talked about our manipulated markets and what a jok the hft stuff is or how the big boys can manipulate it.

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