You’ll Never Guess Who’s Been Buying Stocks…

April 27, 2016

Futures are looking weak again.

Traders gunned for 2100 on the S&P500 last week. They briefly touched that level, but there was no follow through for the obvious reason: no one with a brain believes this rally.

We’ve broken above the downward trendline established by a series of lower highs in 2015. However, there’s a decent space between here and the all-time highs that has yet to be filled. And with momentum waning, it’s quite possible this move was a false breakout.

In truth it’s difficult to find just who is buying stocks right now. Corporate buybacks are in a blackout period, so it’s not that. Corporate insiders are selling the farm. Individual investors are pulling money out of stock funds. And institutional investors have been net sellers of stocks for weeks now.

This leaves Central Banks.

What used to be conspiracy theory is now a fact: the futures exchanges permit Central Banks to buy stock futures to provide “liquidity.” It is not coincidence that this policy occurred around the time the markets began to feel increasingly manipulated with stocks ramping higher for absolutely no reason at various points during the day.

If this whole mess sounds like a recipe for a Crash to you, you’re correct. Markets require actual buyers to perform. Sure, Central Banks can manipulate stocks here and there, but you need real buy orders for a market to not completely implode.

Remember the Flash Crash? Remember 2008? Central Banks couldn’t stop those either.

Take a look at the S&P500’s long-term chart. Where does it look like it’s heading to you?

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Best Regards

Phoenix Capital Research

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Graham Summers is Chief Market Strategist for Phoenix Capital Research, an independent investment research firm based in the Washington DC-metro area with clients in 56 countries around the world.

Graham’s clients include over 20,000 retail investors as well as strategists at some of the largest financial institutions in the world (Morgan Stanley, Merrill Lynch, Royal Bank of Scotland, UBS, and Raymond James to name a few). His views on business and investing has been featured in RollingStone magazine, The New York Post, CNN Money, Crain’s New York Business, the National Review, Thomson Reuters, the Glenn Beck Show and more.

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