THE DOT - if this turns orange or red be alert

Friday, October 22, 2010

part 2

1. When goldman advice is to jump on the bandwagon the end is near - though they do tell the truth bernie boy and his entourage from different banks and hedge funds are exactly playing that game - if someone like goldman asks you to join its getting dangerous.

Goldman Advises Clients To Front Run The Fed Via POMO

Tyler Durden's picture

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.

From a GS distribution to clients:

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.

2. Well another observation from goldman but always be very careful when the devil gives you stock tips at the low they came up with another bearish scenario but this time I rather do agree. the above observation rather contradicts this one.


Goldman Sachs: At 7% Above The 55-DMA, The Market Has Been More Overstretched Just Once In History, And Other Mispricings

John Noyce, Goldman's arguably best technician, in his weekly Charts that Matter, has released one (among many) interesting observation on just how overbought the market currently is, and more specifically just how desperate the velocity of the pick up in the stocks since August has been, in order for levered beta players such as hedge funds, as we predicted in the end of August, to make up as much of their year as possible before seeing redemptions (even so many will not survive into 2010 as the entire 2/20 model is now crumbling). Specifically, by looking at where the S&P is relative to its 55 DMA, Noyce notes that every time the market has gotten to above 5% its trailing average, it has always entered a period of consolidation (read at least modest selling). Furthermore, compared to the recent trend extreme of 7% above 55 DMA, the market moved meaningfully above one just one occasion in the past: in January 2009... just before the crash to the decade lows of 666 on the S&P occurred.

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