We had a nice pattern developing, but something disturbed it.

Some thought the Federal Reserve would be stepping in soon because they assume the policy makers have banned 10% corrections. But alas, another central bank panicked first.

“State Buying” comes from the China’s “National Team” put together a few years ago when their market crashed. It follows the mold of the US Plunge Protection Team. In other words, its not investors but the Chinese Govt that stepped into the markets to buy stocks last night to prop their market up.

It appears they may need to do more.

Anyway, it lifted global markets overnight and the SP500 index opened 1% higher than it closed and created the disturbance in the selling force that has been growing recently.

Speaking of selling forces…

Remember Tesla’s entry into the SP500 index (moved from the TSP S fund to the TSP C fund). First there was front-running the move into the SP500 index, then there was forced SP500 index fund buying. And now that appears to be over.

TSLA bounced over 13% today which means it is only down 27% from its high after being down 38%. I am having flashbacks to 2000…

…in 2000 after falling 39%, Cisco put in a hefty bounce too. Or a few bounces.

CSCO lost 88% before it was all over. They were a good company whose stock got caught up in a tech bubble. They were not the only ones.

But stocks did not have China’s National Team in 2000, nor an active Fed’s Plunge Protection Team or the ECB’s $1.4 trillion in buying on automatic pilot back then.

Then again, in 2000 we did not have a global debt bubble, a global housing bubble along with a broad stock market bubble. We just had a simple tech stock bubble.

What interesting times we live in.

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Categories: Perspectives