Friday, March 13, 2009

Reading the Entrails -- Part 2

Here's the latest Dow Jones Industrial's graph, hot off the (NY Times) press:
And here, for comparison is the Standard & Poor 500 Index, also for today:
Finally, here's the Nasdaq index for today:
Notice anything interesting about these three graphs?

Gee, they look almost identical, don't they? Now how could that be?

Well, I'm not an expert on this sort of thing, so I'm hoping someone reading here will be willing to lend us his or her expertise to explain this strange phenomenon -- because it looks awfully suspicious to me.

The Standard and Poor and the Dow Jones might be expected to have some things in common, since the Dow Jones is, I believe, a subset of the S & P. But the Nasdaq represents a completely different set of businesses, differing widely in many ways from the Blue Chips of the Dow Jones. What does it mean when the indexes of all three move up and down in lockstep like that? By all means, correct me if I'm wrong, but it looks to me like these markets are being manipulated, possibly according to a scheme similar to the one I presented in my last post, where bets are made based on the relation between the principal index and the VMA (voume moving average). If this is the case, then what does it mean when, at the end of the day, the "market" is up or down by this or that number? As far as I can tell, all it means is that this is where things stood at the time the betting window slammed shut.

Invariably the news media offer fatuous explanations of why the markets behaved as they did on any given day: "dire employment news causes market to nosedive," or "unexpected manufacturing profits boost market," etc. If these indices actually reflected anything meanigful about the business climate from day to day, then we'd expect to see significant differences between the way investors were investing in these three markets from day to day. But we don't. Keep your eye on these three indices from now on and you'll see how they're almost always in lock step, amost perfectly synchronized. Many people are acting very excited this week because the market has "gone up," which is taken as a sign of possible recovery. To me, however, it just looks like more of the same, just a lot of random gibberish, produced by some very heavy bettors manipulating the markets to sit up and beg on command.

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