From ZeroHedge.com, we saw this article: “Veteran S&P Futures Trader: ‘I Am 100% Confident That Central Banks Are Buying S&P Futures'”
As someone with 14 more years experience than that veteran, much of it operating the world’s largest S&P futures (ESZ14:CME) desk, right on the CME trading floor, we know who is buying and selling S&P futures first-hand. We found some truth to the article, and some fiction.
While the article written by a 23 year floor trader for Zero Hedge was good most of what the story had to say is something I have been talking about in the MrTopStep Opening Print for years. I too am self-taught but my back ground is in large order execution; the type of orders that would move the Dow +100 or -100 points during the height of the credit crisis. I ran the desk and I traded in and out of the S&P pit. I also follow historical and seasonal patterns and believe in “following the money “ ie the fed and I have always been a contrarian ( with the exception of the last 4 years)
I also have been saying for years that the buyers (big investment firms and mutual funds) use the “shorts” that leads to a “complex system” popping. At MrTopStep we have had a rule that it takes “days and weeks to knock the S&P (^GSPC:SNP) down but only one to bring it back.” It’s my theory that in a zero borrowing cost world the mutual funds are buying when the S&P is going down and buying when the markets are going up.
In the Zero Hedge story the “Ex-CBOT S&P trader” talks how the buyer “extracts all sellers” and that there is only an audience of one buyer, the Federal Reserve or other central banks with a goal to “stimulate” our economy by directly buying stock index futures. I don’t believe that but I do believe that the PPT exists in the Fed’s free money programs. And yes… in the new world investing order the Fed is your friend and you’re not supposed to fight it or its QE programs. As for using “events” through their controlled media I am not sure about that, either. Yes the end of QE was a set up but that’s how the news works now.
Take Reuters, who not only give you the news but can help you set up a new algorithmic trading system. That’s how we think the funnel works. Get the pubic short off the Ebola panic and weak European economic headlines and then let the algos move on to the next story like the Bank of Japan’s QE, leaving everyone short and covering into the rally. Because of my program trading background I read that type of price action every day of the week. One thing I don’t disagree with is how everything happens in Globex now but again I don’t think the Federal Reserve is buying S&Ps at night, it’s the fed easy money programs that promote stock buy backs and large IPOs that have and continue fuel the markets higher.
As for the PPT (Plunge Protection Team) buying all the time I don’t agree with that either. It’s my belief the Fed / PPT “doesn’t” have to buy all the time because zero borrowing cost does it for them. It’s not like the feb just goes and buys the S&P it’s the big investment firms and mutual funds that buy the cash S&P and like I said they are buying when the markets are up or down. Im sorry but this is how the game has and is being played. When it comes to the government trying to make a more equal playing field that has been part pf President Obama’s plan from Day One but it hasn’t worked. The ethnics of the US (blacks and Hispanics) have not benefitted at all and yes when the printing presses stop the leverage that has caused trillion of debt will have to be paid back and that is when the upside part will come to a close.
In the end the Zero Hedge story is part fiction and reality. The PPT does exist but as I have been saying for the last 3 to 4 years it’s all tied up in zero borrowing cost and until that changes you won’t have to worry about the Fed’s off-shore accounts, just your own.