The Great Election Pump and Dump
Ceri ShepherdGoing into August 2004 the market was down heavily in particularly the NASDAQ which was looking at a 10% loss. This is not good just before an election, Presidents are not re-elected when the markets are falling. Everything was looking very bearish it looked like the Iraq war rally had run out of steam at exactly the wrong time for the election. We wrote about this publicly in March 2004
I suspect that this mini bull started too early for the election and has not had a decent correction in the last year. I therefore have a nagging feeling that the S&P500 may go down to its 200MA currently at 1048 or even slightly below and then the stops will be pulled out to get a nice election bounce so that CNBC can tell us all that 'it was just a healthy correction in an ongoing bull market'. However history shows that markets will eventually have their way. Just ask the Japanese!!
After all the efforts throughout 2003 to hold the markets up by whatever means possible it just did not seem possible that they were going to throw it all away in sight of the finishing line.
We needed a good old fashioned pump! So that everything was rising strongly on the big election day. They say that a picture speaks a thousand words!
What I feel is so interesting is the size of the gap ups and candlesticks in the vicinity of the blue arrows coincident timing? What is also interesting was that the dump seemed so orchestrated as well as if upon return to work after the Christmas holidays the order was given " George is in DUMP!!!!"
I stated to our customers on November 5th 2004 "I am going to go out on a limb and state that in my opinion this is a giant bear trap and a cruel one which will trap a lot of naive bulls"
After being around the markets for a while you gain a sort of 6th sense for the actions of what Rick Ackerman refers to as "Da Boyz". Will the market now rally above its December 2004 highs? DON'T KNOW will the markets now fall below there August 2004 lows? DON'T KNOW.
The markets can do anything at any time and frequently do, it is not our knowledge of the markets that is important but the way we trade them. We at Trendinvestor have sat all of 2005 in cash as often it is better to do nothing than lose something. We are not Bulls or Bears, we simply trade what we are given.
It can be stated that the above election pump is blatant manipulation of a supposedly free market to achieve a political aim? YES. However we would view these actions as a large market participant driving the graph upwards. We are not going to argue with whoever is doing the pumping, throughout this period. We are going to help him by being long the market as well as that is what the trend because of his actions is telling us to do. As soon as he dumped and turned the trend over so did we. We do not like this intervention, we are passionate believers of free and unfettered markets, Governments always but always eventually mess everything up.
However it is not wise to stand against the prevailing trend in support of your beliefs. That is a bit like standing on the tracks in front of a 100mph express train you will be flattened.
Got to hand it to "Da Boyz" it was a classic pump and dump. They got there man elected, and made some decent money on the Long side throughout the duration of the Pump and now some decent money on the Dump from the Short side.
15 April 2005
Ceri Shepherd is head of www.trendinvestor.info we use a mechanical primary trend based trading system that since January 1st 1995 has turned $50,000 into $84,357,380 by the end of May 2004 trading the NASDAQ 100. It has also never had a single losing year. Our monthly trading results together with subscription details are available at our website.
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