The 3 Minute Ramp
In the final 3 minutes of trading for 2018, the Dow Jones Industrials (Dow) gained an amazing 177 points (0.76%).
The stock market’s fireworks didn’t just prop the Dow. The Standard & Poor’s 500 (SPX) rose .72% and the Nasdaq 100 also(NDX) gained .70%.
All three large capitalization indexes had MAJOR moves in less time than it takes to boil an EGG. There was no news. What happened?
Painting The Tape?
The closing price on December 31 of ANY year affects the paycheck of quite a few people. Fund managers and corporate execs are judged and PAID based on the annual performance of their companies. A nice close on December 31 doesn’t hurt!
Would it be a stretch to suspect that some combination of these groups bought their own stocks within minutes and seconds of the close FOR THE YEAR to positively affect their performance?
The practice of “marking the close” is a form of Market Manipulation known as “Painting the Tape”. The term goes back to the days of the Ticker Tape. Parties would coordinate fictitious trades to create the appearance of heavy volume at high prices to fraudulently induce innocent investors. (https://www.investopedia.com/terms/p/paintingthetape.asp).
More Pension Re-Balancing?
The last 4 trading days have been characterized by exceptional volatility. This appears to have been part of a Pension Re-Balancing. For more information see: “Bear Market Over or Bear Market Rally?” (https://markonomics101.com/2018/12/30/bear-market-over-or-bear-market-rally/).
In a nutshell, Pension Funds regularly “reset the stock-bond mix” in their portfolios. The formula at the end of this quarter required a substantial PURCHASE of Stocks and an equal amount of SALE of Bonds.
The Charts on the left compare last week’s levels on the Dow versus the Yield on Ten Year Treasuries for the 3 days after Christmas.
Each Dow “Moonshot” was accompanied by heavy selling in Treasures (causing HIGHER yields). Asset Re-Allocation is not only perfectly legal but a part of portfolio optimization.
Painting the Tape, however, is illegal. The ramp that occurred during 2018’s final 3 minutes occurred with a CLOSED Bond market, so it was obviously not done to balance a portfolio.
Painting the Tape is a clear violation of Fiduciary Duty and robs shareholders and investors alike. No one ever said Wall Street is inhabited by altruists.
Be Informed, Not Misled in 2019
We hope that you’ve enjoyed our various essays over 2018. Wall Street is not for the innocent, but it can be for the informed. That’s where we come in. Our mission is to inform AND educate without any conflicts of interest.
Information is Power. Information is Wealth. Honesty may be practically NON-EXISTENT, but it’s still a RELIGION at Markonomics101.
Wishing You A Happy and Prosperous New Year!