PPT Part Deux

Many people can produced charts much like the ones above and the one below. This is 2007 and what is interesting is the amount of strong buying at "critical moving averages" As the indices are about to break the long trending moving averages, more often than not, there will be big buying (usually computer generated trades) to whisk them to high ground causing investors to regard there is a strong bounce from "not breaking long trending moving averages usually the 200 day moving average".

Of course the counter explanation is that there are a lot of quant funds, and usually these computer models to buy at critical levels. That would hold water but these quants would not have the balls or gumption to do that day in day out or even try to lead reversing the market. What I think is the PPT generated trades come in first thus triggering the quant funds into action as well. Sometimes the down trend is so strong it is highly unlikely that quants will be wanting to lay on the train tracks themselves as the last bastion.

When the stock market is at risk of plunging, it is alleged that the PPT will employ the this tactic i.e. dipping into the Treasury Department’s US$40-billion US Exchange Stabilization Fund to buy S&P 500 index futures and cause spreads to widen between the futures and cash markets for equities. This then gives arbitrageurs a chance to reap risk-free profits by shorting the futures contracts and buying the stocks in the S&P 500 basket. Just consider the way the US markets closed again on Friday (reversing almost all of a triple digit losses most of the day). It is hard to believe otherwise as it has happened too often, and this time on a Friday to boot.