To those who look to Fed POMO days as a guaranteed panacea to underperformance and an even more guaranteed green close, you are right (at least, so far). But that is only half the story. It turns out that combing through POMO data yields a very surprising set of outcomes, namely, that the ultimate return on any given POMO day is almost exclusively a function of the Submitted-to-Accepted ratio. As John Lohman highlights, "the generic market effect on POMO days (i.e. stocks and yields up relative to non-POMO days) should be pronounced when the submitted-to-accepted ratio is relatively low (“meets expectations”) and muted when the ratio is high (“a negative surprise”, particularly if said Dealers had already positioned themselves in pre-POMO trading, based on a set of expectations regarding the outcome)." Indeed, the empirical result is precisely that. Which is why in addition to keeping track of POMO days, a far more critical piece of information is tracking the S/A ratio disclosed every day at 11am. If low, and if market performance is below a specific bucket’s average, it may be a green light for a stratospheric ramp into market close, and a signal to frontrun the market alongside the Primary Dealers.
Without further ado, here is the statistical data compiled and associated narrative by John Lohman that predicts not only market performance, but Primary Dealer frontrunning via Fed monetization generosity.
POMO Submitted to Accepted ratio
In a prior Zero Hedge post (here), it was clearly demonstrated (to all save a few unnamed asshats who believe in coincidences against all statistical probability) that equities and interest rates tend to rally on POMO days relative to non-POMO days. Here, using the Fed’s Total Par ‘Accepted’ and ‘Submitted’ data, we can show that, not only is this effect not a coincidence, but that the magnitude of the market’s reaction to POMO on any given day is positively correlated with the outcome of that day’s operation.
The POMO ‘Submitted-to-Accepted’ ratio can be thought of as being similar to a reverse bid-to-cover ratio in Treasury auctions. Primary Dealers submit a certain volume of paper and the Fed accepts a portion of it. If POMO is indeed having a direct impact on the markets, there should be a relationship between the submitted-to-accepted ratio and…
This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible. Feel free to contact me directly at email@example.com with any questions.
Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
Precious metals are under pressure once again this morning led by Silver which just hit its lowest since August 2010. It appears investors are liquidating precious metals to make room in their 'safe haven' portfolio for precious Ma's Alibaba IPO... because what could go wrong there... (Russell 2000 is also seeing notable liquidation)
What makes us think this is BABA liquidation (obviously tongue-in-cheek but the timing is odd...)
Note from dshort: I've updated this series to include the data in yesterday's Federal Reserve release of the 2014 Z.1 Financial Accounts for Q2. Based on data extrapolations through the current close, the Q Ratio is 70% above its arithmetic mean and 83% above its geometric mean. The current valuation level is surpassed only by the turn-of-the-century Tech Bubble.
The Q Ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It's a fairly simple concept, but laborious to calculate. The Q Ratio is the total price of the market divided by the replacement cost of all its companies. Fortunately, the government does the work of accumulating the data for the calculation. The numbers are supplied in the Federal Reserve ...
Administradora de Fondos de Pensiones Provida S.A. (PVD) shares will not be trading on the NY Stock Exchange after today. Tomorrow, shares will be harder to sell. Strangely, I wasn't able to find information on the internet, but Paul just sent me a copy of the email he received from Interactive Brokers.
We're selling PVD out of the Virtual Portfolio today at $87.18.
From: Interactive Brokers dated July 18, 2014
Holders of AFP Provida S.A. American Depository Receipts (ADR) are advised that the Company has elected to terminate the Deposit Agreement effective 2014-09-18.
Although the stock market displayed weakness last week as I suggested it would, bulls aren’t going down easily. In fact, they’re going down swinging, absorbing most of the blows delivered by hesitant bears. Despite holding up admirably when weakness was both expected and warranted, and although I still see higher highs ahead, I am still not convinced that we have seen the ultimate lows for this pullback. A number of signs point to more weakness ahead.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-r...
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The CBOE Vix Index is in positive territory on Friday morning as shares in the S&P 500 Index move slightly lower. Currently the VIX is up roughly 2.75% on the session at 13.16 as of 11:35 am ET. Earlier in the session big prints in October expiry call options caught our attention as one large options market participants appears to have purchased roughly 106,000 of the Oct 22.0 strike calls for a premium of around $0.45 each. The VIX has not topped 22.0 since the end of 2012, but it would not take such a dramatic move in the spot index in order to lift premium on the contracts. The far out-of-the-money calls would likely increase in value in the event that S&P500 Index stocks slip in the near term. The VIX traded up to a 52-week high of 21.48 back in February. Next week’s release of the FOMC meeting minutes f...
Despite the various opinions on Bitcoin, there is no question as to its ultimate value: its ability to bypass government restrictions, including economic embargoes and capital controls, to transmit quasi-anonymous money to anyone anywhere.
Opinions differ as to what constitutes "money."
The English word "money" derives from the Latin word "moneta," which means to "mint." Historically, "money" was minted in the form of precious metals, most notably gold and silver. Minted metal was considered "money" because it possessed luster, was scarce, and had perceive...
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Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
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