SPECIAL SATURDAY POSTING
What the hell is going on in the stock market this week?
The Dow Jones index had a 1,000 point or 3% ride on Friday before settling up 330 points up 1.4%. over the course of the 5 days of trading there was a 6% range from highs to lows.The VIX, or the fear index climbed 68% over the week as investors became more skittish as the Dow began to resemble the price action of bitcoin with its movements. But to put that in context bitcoin had a 37% change from top to bottom over the last week.
Surely the row over the federal government shutdown had something to do with the increase in volatility, but the action in the futures markets — especially the Dow e-minis showed there was far more volatility there than in the open trading markets.
As I wrote earlier this week, the Plunge Protection Team or the official title of President’s Working Group on Financial Markets, which was established under President Ronald Reagan, had a mighty hand in the futures. The Presidential Order laid out how to influence the market through buying Dow and S&P 500 futures on a large scale to influence the market sentiment in a positive way when a cratering of stocks was anticipated.
Since President Trump has so often used the stock market as his barometer for overall success of his economic plan, I could see him using the Plunge Protection Team to bolster the market far more than his predecessors.
The other two factors playing on the market over the last week was the FISA abuse memo, which I wrote about here and Janet Yellen’s comments about the economy being in a bubble after exiting as Federal Reserve chief.
Let’s also remember that markets that are not hamstrung by zero interest rates and a Fed perverting the government bond market with huge purchases that push out all the usual buyers to suppress prices is perhaps a thing of the past.
Once we get Uncle Sam out of the markets, we will naturally see an environment with more volatility, and also a better chance to gain profits as markets are unshackled.