The Pumping

Markets this morning were met with a barrage of bad news – falling markets in Europe, rising jobless claims, falling Philly Fed – all symptoms of an economy that has turned south. After each of these items, markets promptly headed lower. Then the pumps were turned on and the losses were quickly recovered and markets turned higher. On narrow breadth. Bizarre. Who is doing this? Dip buyers. Possible. But my sneaking suspicion is that it is an organized campaign by Obama’s allies on Wall Street. When you look at US stocks relative to anything else – commodities, bonds, international markets – they are a sharp outlier. Obama knows that if there is another stock market drop, his re-election chances will vanish. The bank foreclosure settlement was his gift. Now it is payback time.

Edit: Well the pumping failed and the market has been sliding with the Dow down 60-odd now. However, the thought stands. As John Hussman has observed, stocks are and have for months been over-bought, over-bullish, over-valued and in fact over-everything-else which has been reacting to events. And one has to wonder why.

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