OK, not that kind of market. We’re talking about the stock market.
Given the low volume experienced by our consistently rising stock market over the last few months, the fact that all of the market’s gains have occurred from after hours buys of S&P futures contracts, and the recent pattern of the market rising on both good and bad news, this quote could have come from any one of millions of participants in the markets. I know I’ve thought it. But the above comment was made by Charles Biderman of TrimTabs, a market analysis firm whose focus is the source of liquidity in the market and the flow of funds into and out of the market from a macro perspective. Biderman is a respected market analyst, you can learn a bit more about him here.
He raised eyebrows last week with his view that it was possible that the U.S. government was behind the market’s recent rise. Unable to figure out the origin of approximately $600 billion of new capital that has made its way into the market in recent months he has used the process of elimination to arrive at his view that the Fed or Treasury may be buying S&P futures after hours in order to put a bid under this market. The advantage would be that a rising market builds confidence for spending and hiring, props up balance sheets, and assists in the much needed recovery. While it would not be illegal it would be unusual and mis-leading for this not to be announced in some way. However, announcing such a move would be self-defeating as the market would understand the artificial nature of the move and look to sell into the government while it is buying. It also raises the question as to what happens when it stops buying and eventually starts selling.
We’ve stated before that we are not much for conspiracy theories but given that this is a thought coming from Biderman, and not the lunatic fringe, it bears pondering.
Consider this interview of Biderman from this morning’s Bloomberg News:
