Just another Manic Monday.
The Dow Jones index cratered 1,500 points just after noon yesterday, until the Plunge Protection Team (PPT) stepped in to avert a crash and cut the losses in half by 1:30.
The PPT was created by the Reagan Administration in 1987 to steady the market during turbulent times. It includes administration personnel including Treasury and Commerce chief and the Fed chief. Through the Fed the PPT works with big fund managers and money market pros to jump into the market to catch the falling knife.
Reagan created the PPT — through executive order — after the 1987 crash.
So Tuesday morning we see the VIX — the volatility index — is over 50 and is up 260% over last 5 days.For much of the Trump’s presidency the VIX was hovering around 10.
Dow futures are looking at a -320 point or -1.5% opening. Monday’s close on the Dow 1,175 points, which combined with Friday’s -666 losses, shows institutional investors are cutting their exposure to the “bubble.”
But it’s very interesting that at the Tuesday morning open the Dow erased the -320 point futures mark and opened up 320 points. That’s the fingerprints of the PPT. To work in the futures instead of actively buying shares because it is more opaque.
If you look at the news on Friday, then the big news that was tipped all day was the release of the FISA abuse memo. As the big market players took the weekend to digest it and came back Monday with a sell bias.
Giving a quick take on the FISA memo
The FISA memo shows how the Obama Administration worked with the Clinton campaign to spy on the Trump campaign. The Clinton campaign — using Obama’s Justice Dept. and FBI to go to the Foreign Intelligence Surveillance Court and get a warrant to spy on a Trump unpaid aide named Carter Page. But the wire tap picked up much more info on the Trump campaign.
As I have written last week, the evidence to get the warrant from the FISA court was a “dossier” on Trump bought by the Clinton campaign and the Democratic National Committee written by a ex-British spy.
The Obama Justice Dept. was aware of this when the presented it to the court. If the FBI chief ever admitted to the court the evidence was this shady the court would never have granted the warrant to spy.
So given the fact that some serious breaches of the Constitution occurred you could see why large institutional investors are running to the sidelines. As this is happening the black box quant funds are picking up on the panic selling and exasperating the selling where you get the largest point drop in history on the Dow Jones index.
Stay tuned as I will put today’s trading in context this afternoon.