Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Wednesday, November 14, 2012

Anatomy of An Intervention

Stock Market Technical Analysis Blog

Click on image to enlarge

This evening I would like to look at a closeup of the SPY intervention that happened during the night, something that happens fairly often.  The top chart above is a five minute bars chart showing trading in all sessions from noon yesterday through tonight's afterhours close.  Looking at last night's afterhours close we see a 138.09 final print.  Moving sideways to 4AM EST this morning, we see the witching hour begin.  Since late January of 2009, 4AM to 5AM EST has been reserved for the PPT to secretly help the stock market when it is in a sell mode and to really get a bull run going when they have control of the market.  Looking closely from 4AM to 5AM you can see that there were six tiny trades made on ridiculously low volume, some only 100 shares.  I have marked these with six short red marks.  Using those six trades they moved the SPY nearly $0.75 higher, the equivalent of a seven point move on the S&P 500.  This intervention activity happens on average twice per week.  Once they are finished at 5AM EST the regional exchanges begin making trades with the various ECNs through the ARCA routing system for the purpose of setting the precedent on which direction they want to open the premarket trading  session at 8AM EST and the regular session at 9:30 AM EST.  When the PPT knows that the various institutions will be taking the market lower with the new market day, they come in and raise the SPY sometimes as much as a full dollar between 4-5AM so that when the regular ARCA trading begins at 5AM and the pulldown agenda begins it will affect the market less because the price will be coming down from a higher level after it has been raised during the 4AM intervention session.

Now that we have taken a closeup look at the intervention, let's take a look at why this was not enough to help the stock market today.  Looking at the lower row of charts, the first chart on the left is the daily bars chart of the VIX with 5/10/20/50 EMAs.  With today's opening bar the VIX red 5 EMA was sitting on top of the blue 20 EMA line.  Through the middle of the day it was still sitting there but not starting to lift from the 20.  By midday the SPY started slipping through its 50% Fibonacci line and also its 200 day EMA line shown in the next two charts on the bottom row.  As this happened, the VIX daily 5 EMA started lifting from the 20 EMA line and this triggered sell programs as it happened and the more the market dropped bigger sell programs were triggered.  To finish the day with an ugly close instead of an ugly open.


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