S&P Above 1400 As Fed Conducts Second $600 Million Repo Following Nearly 4 Year Hiatus

Tyler Durden's picture


Last week we explained why while endless promises of Fed intervention may be enough to confuse the market and force endless rounds of short covering as weak hands are flushed out of positions under threat (but never action) of central planning, banks are no longer in a position to delay indefinitely the moment they have all been waiting for: a $500+ billion reserve injection which will allow them to go hog wild in investing in risk assets or plug capital shortfalls (off the books of course), and otherwise continue their lives in a ZIRP environment which makes net interest margin existence impossible. We also showed that for the first time after nearly 4 years, the Fed conducted a regular (not reverse) repo last Friday. As we explained, regular repos are liquidity injecting, and while the Fed may promise these are merely test runs, everyone knows they are anything but, and are merely a telegraphing to the banks of what is in store. Today, the day after the last repo expired, we just got a new 3 day repo, only not for $210 million this time, but one for $600 million, including not only Treasury, but also Agency and MBS securities. The result: S&P above 1400 for the first time in months.

From the NY Fed:

And this is how the history of the Fed's various repo operations has looked like in the past 4 years.

Sure enough, the S&P just went above 1400 like clockwork.

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Tue, 08/07/2012 - 10:17 | 2684458 walidsassia
walidsassia's picture

and what is next ? 

Tue, 08/07/2012 - 10:20 | 2684474 slaughterer
slaughterer's picture

"and what is next?"

SPY 142.53 / ES 1423.50

Tue, 08/07/2012 - 10:22 | 2684486 francis_sawyer
francis_sawyer's picture

The only way the $SPX tanks now is if I go ALL IN on otm SPY 150 calls...

Tue, 08/07/2012 - 10:52 | 2684627 LawsofPhysics
LawsofPhysics's picture

Do it Francis, I'll be happy to take the other side of that trade.

Tue, 08/07/2012 - 12:16 | 2684963 francis_sawyer
francis_sawyer's picture

No way Jose...

The only way I keep my sanity [which, arguably, is hanging by a thread], is to stay completely away from paper markets...


Oh ~ that AND, the occasional cheap entertainment value I get by ruffling the feathers of peacocks... which is an artform in of itself... :-)

Tue, 08/07/2012 - 10:58 | 2684647 Precious
Precious's picture

Park your car in any major city.  Pay for the parking meter, hotel parking or parking lot.  Then try to tell us there is no inflation.  Not only is there inflation --- it's up about 100% in the past 5 years.  Unlike chicken, eggs, milk, pork, vegetables and fruit, you can't make many more parking spaces.  Not without covering equally inflated unionized labor and healthcare --- and maybe not even then.

Tue, 08/07/2012 - 11:04 | 2684673 Sudden Debt
Tue, 08/07/2012 - 11:29 | 2684792 Benjamin Glutton
Benjamin Glutton's picture

CPI sample period for Fed .gov ends around mid August I believe.

Tue, 08/07/2012 - 12:23 | 2684997 vast-dom
vast-dom's picture


Tue, 08/07/2012 - 12:30 | 2685025 Xibalba
Xibalba's picture

I believe it's referred to as 'monetary policy'

Tue, 08/07/2012 - 10:32 | 2684535 Stock Tips Inve...
Stock Tips Investment's picture

SP-500 will test 1,420 points. If this level breaks, would have a good chance of dealing with 1.570 points, which represents 2007 high. if it fails this purpose, we would see a new leg down. Today in my blog there are two very interesting post on this topic.

Tue, 08/07/2012 - 10:47 | 2684610 stocktivity
stocktivity's picture

In the old days...when charting made sense, you may have been correct. In these rigged markets, only the large Wall Street banks win. As long as the printing presses can keep printing, It's all Bullshit!

Tue, 08/07/2012 - 11:28 | 2684786 Meesohaawnee
Meesohaawnee's picture

dead on. why do some still try to apply technicals to this joke is beyond me.

Tue, 08/07/2012 - 10:18 | 2684463 Cognitive Dissonance
Cognitive Dissonance's picture

I just love it when they mainline the (leveraged) fiat directly into my blood stream. What a freaking high. Was that as good for you as it was for me!

<sigh> I love Bernanke!


Tue, 08/07/2012 - 10:33 | 2684540 Dr. Richard Head
Dr. Richard Head's picture

Freebasing fiat has replaced bath salts and the bankster zombie apocolypse continues. 

Tue, 08/07/2012 - 10:48 | 2684606 Cognitive Dissonance
Cognitive Dissonance's picture

Bernanke is The Candyman.

"The candyman mixes it with love to make the world taste good."

Tue, 08/07/2012 - 13:01 | 2684783 fuu
fuu's picture

They call him Cumulonimbus, because you know he makes it rain.

Tue, 08/07/2012 - 11:21 | 2684745 Oso
Oso's picture

We knew this was coming, the Fed never removes its hand from the market.  No one, least of all politicians, understands the effects of repos.  What better way to levitate everything while the world crumbles.  Anyone shorting now is martyring themselves.

CD, long time, hope you're well.

Tue, 08/07/2012 - 11:30 | 2684796 Meesohaawnee
Meesohaawnee's picture

like ive said a thousand times. theres a short ban just like Europe. We just do things in stealthy ways here. no different. At least the eurpeans have the balls to tell everyone

Tue, 08/07/2012 - 10:24 | 2684468 Jlmadyson
Jlmadyson's picture

2008 is fully back but this time with all the mountains of debt that have ballooned since.

We all know what this means. They are losing control again.

The real question which banks are needing them and remember this after Bernake telling us just last month our banks are much better capitalized since the 08 crises.

If so then why the desperate actions again?

Tue, 08/07/2012 - 10:29 | 2684522 Hype Alert
Hype Alert's picture

It's like a kid jumping over a coffee table.  They do it once.  Then again.  Then every time they go through the room.  Then one day, maybe they're tired, shoe isn't tied or somebody parks something on the other side of the table.  If that doesn't happen then they get a longer table to jump or people stop caring and start leaving things piled on the table.  Moral hazard happens.  Risky behavior rises to the point of failure.  People think they ARE THAT GOOD.

Tue, 08/07/2012 - 10:32 | 2684539 Winston Churchill
Winston Churchill's picture

Looks like the SBS is freezing up.

How long can this Wily E Coyote moment last until gravity asserts.

Get the hell out if you are  still in this 'market'.

Strange how those inverse  ETF closed down last week.

More and more signs of imminent collapse.

Tue, 08/07/2012 - 10:20 | 2684477 buzzsaw99
buzzsaw99's picture

<--- doin' it for the people

<--- doin' it to the people

Tue, 08/07/2012 - 10:45 | 2684492 francis_sawyer
francis_sawyer's picture

<=== 1500 first

<=== 600 first

Tue, 08/07/2012 - 10:26 | 2684504 slaughterer
slaughterer's picture

Is Ron Paul going to investigate this mis-use of Fed funds?  

Tue, 08/07/2012 - 10:31 | 2684530 Widowmaker
Widowmaker's picture

Ron Paul is going to bark and jerk off like he always does.

Supporting that bastion of distraction only wastes your time and ensures nothing changes.

Tue, 08/07/2012 - 11:06 | 2684677 JR
JR's picture

the most dangerous man in the world to TPTB...

Ron Paul Barred From Speaking at Fascist RNC Convention in Tampa

Posted by Lew Rockwell on August 6, 2012 08:21 AM

Even though this is an outrage in one sense--Ron Paul is one of the very few non-sociopaths in Republican politics--it also makes sense. After all, he would have been required to Heil Romney in his speech, in words written by the Mittster's minions, and that is something Ron Paul would never do. After all, Romney--warmonger, Keynesian, bankster, nationalist, gun-controller, socialized medicine advocate, dronist, torturer, police statist--is the exact opposite of Ron Paul. Romney clearly yearns to commit mass murder against the Iranians. Let's face it: Ron Paul is far too good for the Republican party. And in what passes for its heart, that criminal organization knows it. (Thanks to Travis Holte)


Tue, 08/07/2012 - 10:21 | 2684479 GMadScientist
GMadScientist's picture

Heroin junkie scores two methadone suppositories. Film at 11.

Tue, 08/07/2012 - 10:22 | 2684484 Hype Alert
Hype Alert's picture

But things are better.  Things are so good there's talk of New QE.  And Europe's better.  How ever can this be?

Tue, 08/07/2012 - 10:23 | 2684488 john_connor
john_connor's picture

Tulip Bulbs Bitchezzzz!

Tue, 08/07/2012 - 10:24 | 2684493 Bastiat009
Bastiat009's picture

S&P500 has massively outperformed gold so far in 2012, for the first time in a very long time, without taking dividends into account.

Can HFT keep it up forever without ever taking reality into account?

Tue, 08/07/2012 - 10:28 | 2684513 CvlDobd
CvlDobd's picture

I'll be happy to buy your gold from you if it gets you to stop bitching about a voluntary investment you made all by your lonesome.

Tue, 08/07/2012 - 10:44 | 2684597 Bastiat009
Bastiat009's picture

Stating facts is not bitching.

Tue, 08/07/2012 - 11:06 | 2684678 CvlDobd
CvlDobd's picture

Well that's my mistake. I see your name, then gold, and I figure I should take your comment as a form of bitching about gold.

Tue, 08/07/2012 - 10:26 | 2684503 Dr. Engali
Dr. Engali's picture

I feel wealthier already. I think I'll go out and buy me a new house and car...financed of course. That wealth effect has me feelllliiinnng good!

Tue, 08/07/2012 - 10:26 | 2684507 q99x2
q99x2's picture

I'm in for the election ramp. Then they're susposed to start killing arabs again. That's always good for a few 100 more.

By then it will be world central bank circle jerk time and into 2013. People will be starving everywhere.

Tue, 08/07/2012 - 10:26 | 2684508 Everybodys All ...
Everybodys All American's picture

Is this essentally an open ended QE? Are we at QE infinity here? It would appear the answer is yes.

Tue, 08/07/2012 - 10:27 | 2684509 slaughterer
slaughterer's picture

This is as close as a sign that we are re-living early 2008 as one can get.  

Tue, 08/07/2012 - 11:33 | 2684809 Meesohaawnee
Meesohaawnee's picture

im a novice? can you explain why?

Tue, 08/07/2012 - 10:27 | 2684511 emersonreturn
emersonreturn's picture

thank you Tylers for your vigilence.

Tue, 08/07/2012 - 10:28 | 2684515 TwoJacks
TwoJacks's picture

phenomenol.  I've moved to trading grains as the equity game is just too obviously rigged. good luck

Tue, 08/07/2012 - 10:29 | 2684519 john_connor
john_connor's picture

The Fed, Caffeine, AC/DC, discount window access, and a T1 connection.  What else does one need?


Tue, 08/07/2012 - 14:29 | 2685334 TheFourthStooge-ing
TheFourthStooge-ing's picture

Bath salts, crystal meth, a machete, and an oxy-acetylene torch.

Tue, 08/07/2012 - 10:29 | 2684523 razorthin
razorthin's picture

Now is the time to sell.  Got the guts??

Tue, 08/07/2012 - 11:23 | 2684755 Haager
Haager's picture

I have nothing to sell.

Tue, 08/07/2012 - 10:29 | 2684524 slaughterer
slaughterer's picture

IBD readers will be buying many cup-and-handle breakouts today on the IBD 100.  

Tue, 08/07/2012 - 10:38 | 2684562 Cognitive Dissonance
Cognitive Dissonance's picture

Lots of technical triggers being tripped today. Trying to spook the herd into buying.

Tue, 08/07/2012 - 10:51 | 2684598 razorthin
razorthin's picture

That was actually last week.  Now we're just overbought on anemic volume.  Actually, it's worse than that - At 10:50 I can hardly see a daily or a weekly volume bar on SPY.

Tue, 08/07/2012 - 10:30 | 2684527 unununium
unununium's picture

"for the first time after nearly 4 years, the Fed conducted a regular (not reverse) repo last Friday."

Isn't that just a smidgen misleading, given the multi-trillion in permanent injections that happened over those same 4 years? 

Tue, 08/07/2012 - 11:36 | 2684830 Oso
Oso's picture

those were outright purchases, not repos.

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