Goldman Sachs Says "Front-Run the Fed POMO"

to make money in the stock market. Buy stocks before the Fed's open market operation, and sell into the rally induced by the operation. Rinse and repeat. Buy anything.

The market is in a suspense mode, going nowhere speculating and re-speculating the Federal Reserve's move. Today's sell-off came after the reverse-repo operation was done (that sucked out liquidity from the market). Everything depends on what the Fed does, what the Fed talking heads say.

What's the point of TA? Not much these days, other than to out-guess algo bots..

Here's from Zero Hedge today:

After a few months of breaking down what the simplest trade in the world is, that would be frontrunning the Fed for the cheap seats, Zero Hedge is happy to advise our readers that finally Goldman Sachs itself has capitulated and is now indirectly telling its clients to frontrun Ben Bernanke via POMO. No complicated value investor nonsense, no pair trades, no cap structure arbitrage, no hedging, no levered beta plays. Buy ahead of POMO. Sell. Rinse. Repeat.

On the interplay between the FED and STOCKS: Since Sept 1 – when QE was becoming a mainstream focus – if you only owned S&P on days when the Fed conducted Open Market Operations (in US Treasuries), your cumulative return is over 11%. in addition, 6 of the 7 times when S&P rallied 1% or more, OMO was conducted that day. this compares to a YTD return of 5.8%. the point: you would have outperformed the market 2x by being long on just the 16 days when – this is the important part – you knew in advance that OMO was to be conducted. The market's performance on the 19 non-OMO days: +70bps.

And there you have it - the top in frontrunning the Federal Reserve is now in.

The most recent Fed POMO calendar is linked (there is one tomorrow). Frontrun away.

Oh, and Ben, your criminal organization will one day pay for making a complete manipulated travesty out of capital markets.

I do have one chart to show you. CORN. The bull flag may break out. But it all depends on the US dollar, which seems to be finding (or trying to find) a temporary bottom. I'm not in the stock, but thinking about it, looking at the USD. G20 this weekend, a currency war brewing.

Good luck trading. No matter what Ben and the inkjets do, it could all collapse in a very short time like October 2008, and a trigger in such a case is often political... Just saying...

Coal Trade the Day After

If you picked up the coal stocks that I mentioned in the last post, good for you. I slept late and missed the action :-(

Early birds do get worms and more.

If you have PCX, congrats on the 10% gain in one trading day.

Including PCX, if you look at the weekly charts, it is not too late to go long, AS LONG AS the general market trend is up.

Looking at Coal Stocks for Next Trade

Congrats for those who bought SIRI (wish I had it), congrats for those who bought CENX and still have the shares not taken away in a mini flash crash (like mine). I'm moving on, and I'm thinking coal.

Why? Because it looks like one of the last remaining commodities that haven't broken out. The other one is crude oil, but at least I've caught the last week's big move with UCO calls (sold half today).

I'm looking at the charts for:

MEE (Massey Energy)
ANR (Alpha Natural Resources)
PCX (Patriot Coal)
BTU (Peabody)
ACI (Arch Coal)

BTU and ACI look strong, and may be doing the triple top breakout on the 3-year weekly chart. MEE, ANR, PCX all look alike, and they are still basing.

BUCY (Bucyrus) looks ready for double top breakout, too, on the weekly. It actually looks like a very deep cup and handle, with the handle part itself is a cup. Its competitor, JOYG (Joy Global), has already broke out.

Fundamental reason for coal? The world may be entering "global cooling", not "warming". We may need more carbon in the air to keep the planet warm...

I am also looking at uranium companies, for the same reason. In severe cold, wind and solar just don't cut it. USU (Usec) seems to be forming a symmetrical triangle after wild moves.

As usual, do your own DD.