Is Wall Street manipulating this rally?

As traders push stocks slowly higher, blissfully ignoring all that's still wrong with the global economy, there's evidence that something is amiss.

By Anthony Mirhaydari Jan 20, 2012 1:56PM

Stocks inched up Thursday for the 10th day out of 12 trading sessions in 2012, pushing various technical indicators deeper into oversold territory and reaching levels not seen in many cases since late last April, when stocks were putting in their bull market high. Volume and breadth were pathetic. Up volume accounted for only 65% of total volume on the NYSE.


All that matters, apparently, is that the European Central Bank dumped just over €200 billion in three-year money into the system a few weeks into a long-term refinancing operation to supply capital to banks. While not exactly like the quantitative easing done by the Federal Reserve a few times, this LTRO looks, smells and tastes just like the Fed's QE1 and QE2 to the Wall Street fat cats worried about their bonuses.


And they're using every trick in the book to juice the market higher. But here's the thing: Regular investors aren't buying what Wall Street is selling.


Just look at Thursday's action.


Investors ignored a batch of mostly bad news. There was a disappointing Philly Fed manufacturing report. Greece continued its efforts to negotiate a voluntary debt reduction with its bondholders, many of whom, as you know, are hedge funds that have undertaken a "basis trade" using credit default swaps and are poised to cash out no matter what happens (and therefore have an interest in holding out for the absolute best possible deal).


And there was some disappointing earnings news, too, in what is shaping up to be the worst earnings season (based on positive earnings surprises) since 2001, according to Sundial Capital Research. 


In response, Wall Streeters are buying now, asking questions later, and are beginning to foam at the mouth as they push their bets to try to encourage a buying frenzy. This, in turn, is pushing sentiment measures based on things like options trading, analyst sentiment or the relative volume in the Nasdaq vs. the NYSE to extremes.


Boy, are they pushing. TrimTabs compiled a list of data points showing the extreme optimism on Wall Street:

  • Short interest at New York Stock Exchange members plunged 10.5% in December to the second-lowest level of the past two years.
  • Options traders are growing more complacent. The put-call ratio averaged just 0.81 on the past five trading days, the lowest five-day average since July 2011.
  • The VIX fell to 20.5 on Jan. 12, the lowest level since July 2011.
  • Of the hedge funds TrimTabs surveyed in cooperation with BarclayHedge in December, 42% were bullish on the S&P 500, while 30% were bearish. That level of optimism was the highest since July 2011.
  • Investors Intelligence reports that 51.1% of newsletter writers are bullish, the highest level of optimism since April 2011, when the U.S. stock market topped out.
  • Bank of America's survey of global fund managers found that asset allocators are more bullish on U.S. stocks than at any time since April 2010.

Despite all this, average investors are staying on the sidelines. TrimTabs estimates that U.S. equity funds have received only $3.3 billion in new cash so far this month, which is historically a very heavy month for inflows. Compare that with the $932 billion that flowed into checking and savings accounts, eight times the $117 billion that went into stocks and bond funds as well as ETFs.


Thus the low-volume, narrow-breadth, low-volatility grind higher we've witnessed so far this month. But here's the thing. The half-life of extraordinary monetary policy efforts is falling fast. Very fast.


It lasted for a year starting in March 2009 -- that was QE 1.5, when efforts announced in November 2008 were expanded -- thanks to the tailwinds from the market discounting the end of the recession and the end of the financial crisis. It lasted about seven months when QE2 was teased in August 2010 and was helped by the calming of the eurozone crisis after the first Greek bailout.


Now we're already in the third month of this new European variety of central bank largess.


Yet the economy faces a number of headwinds that are not going away: There are sovereign debt issues, fiscal austerity, rising trade protectionism, the debt-ceiling debate, the rise and fall and rise again of crude oil, a stalling of earnings growth, a whiff of inflation, moribund banks, a spate of elections, and mixed economic reports with sentiment high but job growth and housing still anemic.

Until this dynamic changes, we're stuck in the mud. The Fed, or the ECB, might try to pull us out with lifelines of cheap cash -- but that is now just making the problem worse by fueling inflationary concerns. Just look at the rise in shelter costs due to a tight rental market, a major component of the Consumer Price Index.


Wall Street isn't looking that far ahead, I guess. But folks on Main Street, the ones who are watching at-the-pump prices rise again as those holiday bills come due, or are trying to find a nice rental home, already know what's coming. And it's not good.

Check out Anthony's investment advisory service The Edge. A two-week free trial has been extended to MSN Money readers. Click here to sign up.

The author can be contacted at anthony@edgeletter.c​om and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.

Jan 20, 2012 3:21PM

What people need to remember is.......Investing RISK is only for the individual investor!


The Wall Street crooks have taken all the risk out of the market for themselves because they have infiltrated our POLITICAL and MONETARY systems!


The "TOO BIG TO FAIL" get bailed out with our tax dollars..then they take this money we give them and buy sovernign debt paying 7% from country's like Spain and Italy.

Spain and Italy don't have the means to pay this they get loans from the ECB!

The ECB doesn't have a printing press or the reserves to handle all the debt these countries they get a bailout (swaps) from the Federal Reserve. The Federal Reserve adds more money to the system thus debasing our currency and driving up our cost of living. 


This is nothing more than one giant Ponzi scheme created by the crooks on Wall Street...these guys win no matter if the coin comes up heads or tails because they have the taxpayer as their safety net!

Jan 20, 2012 3:41PM
"Is Wall Street manipulating this rally?"

Don't they always?
Jan 20, 2012 3:30PM
Remember, the market goes down a lot faster than it goes up. This 4 month rally can disappear  in a few weeks. Look at the chart for the past year. The rally looks winded to me.
Jan 20, 2012 4:50PM

The traditional business indicators just aren't there. The World Bank predicts slow growth for 2012. The Euro is in trouble because of European debt. The dollar is in trouble because of US debt and political gridlock. No sizeable increase in demand to drive the economy is on the horizon. Great Britain threatens to exit EU. US and Iran relations are deteriorating as we speak. Yet, the stock market continues to go up. Somebody is pulling some strings somewhere.

Jan 20, 2012 2:58PM
Thanks Anthony. Yesterday Morgan S had a huge loss - but It was less than expected ha,ha - time to celebrate. Bank of America had some surplus after selling his branches in Asia - time to celebrate. Dear Fat Cats not this time - my money stays in my wallet waiting for true recovery
Jan 20, 2012 4:51PM
Wall Street manipulates the market?- I'm shocked!
Jan 20, 2012 5:02PM
The derivatives gambling business has manipulated and driven the market in recent years, not fundamental economic forces.  I'm amazed at the novel excuses the talking heads of CNBC, MSN, etc come up with to try to attribute market movements with fundamental economic factors.  The oil industry taught them how to do this years ago when they came up with their laundry list of lame excuses for prices increases (eg. political unrest in Nigeria, weather in the Gulf) that had no basis in fact.  Oh well that's why they call it free to feed us anything they think we just might believe!
Jan 20, 2012 4:20PM
You know it is rigged to cheat the small investor when WSJ reported that Bernanke had given big money managers a heads up on what they were going to do, when Geitner doesn't know he's supposed to pay taxes and when Obama pretends to hate his big money contributors on Wall Street.
Jan 20, 2012 4:20PM

Does a chicken have lips....?

Wall Street manipulates the market Every day...ha

A blind person could see that..!

Jan 20, 2012 5:58PM

Are markets manipulated?


You make the call...!


When President Obama learned of the whereabouts of Bin Laden on Thursday April 28th 2011, the stock market had been going thru a decline for that week.

But for some reason...Late on the afternoon of Friday April 29th, the Big boys on Wall Street bought stocks in hugh amounts that surprised market analyst with the increase of volumn so late in the day.


In a seemed the biggest firms on Wall Street were NOW putting all their chips to the center of the table in the last hour of Friday's market.


Late SUNDAY broke all across the world and President Obama announced Bin Laden had been killed by the American Military....When the Stock Market opened the next day on Monday morning... almost $3.6 billion dollars were made in the first 2 hours of the market opening.  My question to you is?


How many of you were called on Friday April 29th and told to push all your chips to the center of the table?


This has been your Market Manipulation Minute...enjoy your weekend!

Jan 20, 2012 7:52PM
This headline caught my eye and had to do a double take. Then just laugh.

Is Wall Street manipulating this rally?
What kind of a dumba$s, asinine question is that????They've been "manipulating" the whole market for the last 2 years, duhhhh.

Jan 20, 2012 6:15PM

With all these big players throwing their money in the market right now trying to influence the market and convince the little guy to follow suit, everyone who has a 401K should pull their money out right now and cause their stock prices to fall.  Let them be on the receiving end of a good f&*king for once.  They control the primary fluctuation of the market anyway.

Jan 20, 2012 6:33PM
Main Street is waiting for Wall Street to panic over the lack of sucker money. Then they will turn on each other. Main St will then hang the last man standing, and we will all start over.
Jan 20, 2012 6:41PM

I'm waiting for the house of cards they're building for themselves comes crashing down around their ears.

Of course it's being manipulated.  They only way the dirt-bags there make money is trades.  They get it coming and going. 

However, this time, let them fail.  All of them.  There will always be pieces left over afterwards and maybe we can back to a sane rational market place where LONG TERM investments mean more than the rumor the washroom attendant overheard from some drug hopped "trader".


I'm ready for the fall.  Food, fuel, and "other" supplies for a fairly long period. 


The big final crash is coming soon about May - June topped off with no oil as Israel ignites the middle east attacking Iran and has to use nukes to control the Arabs. 

It's not going to be pretty folks.
If you look at the trading last Friday, it opened down strongly which would have made it a down week and this in January. Yes, manipulation pulled the market higher so the January effect looks good and can be sold that way by the media. As Ed would say to Johnny, "You are correct, Sir!"  
Jan 20, 2012 5:17PM

The wall streeters and the speculators always manipulates the stocks and the big buyers of course.Its a bunch of greedy junk

brokers and thats how they get the million dollar bonuses. People will learn someday and the wall street will have to look for another job. Thay ought to put them all under the jail!

Jan 20, 2012 5:26PM

They are a bunch of BIG SMOCKS


and they will bleed us and squeeze us until there is nothing left

Jan 20, 2012 4:32PM
Wall Street is always manipulating the market. Where do you think that stock goes when you sell it low and buy it back high.
Jan 20, 2012 4:34PM

This is so old it's not funny. When are they going to tell us something new?


This article is a perfect example of Wall Street manipulation.

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

123 rated 1
266 rated 2
485 rated 3
660 rated 4
586 rated 5
652 rated 6
640 rated 7
504 rated 8
289 rated 9
159 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.