Brian Sack: Meet Selling Interest

The man in charge of the Fed's Market Group has had an easy life so far: he has been able to delegate the vaporware levitation of the market to the HFT and the PD crew for the most part of 2010 (with that notable May 6 exception). And when those two fail there has always been either State Street, which has been happy to pull borrow on demand, and of course POMO, which so far worked like a perfect confirmation bias charm. Until now that is - ever since the QE2 POMO buybacks were launched, there has been a perfectly inverse correlation between Fed market interventions and the stock market. In fact the only day the market surged last week was when there was no POMO. This has not gone unnoticed by the stat arbs. Which is why one wonders whether today's double POMO shotgun is not about to backfire. The poetic justice of a second flash crash on the only double POMO day would be beyond words. As a reminder POMO #1 start in 5 minutes and ends at 11am Eastern. We will closely track the market's performance during both this and the next one in what could be a confirmation of a major POMO regime change.