Long Live The V-Bottom And The Winner Takes All

Long Live The V-Bottom And The Winner Takes All

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The central banks have done it again: a V-Bottom and a 6-day win streak in S&P 500, followed by new all-time highs.

Comments from Fed officials who have assumed the task of pumping the market and buy orders from foreign central banks facilitated a V-bottom and a 6-day win streak in S&P 500, as shown in the above chart. The gain in the last six days from the short-lived correction bottom is about 2.5%.

There have been numerous V-bottoms in the S&P 500 established by direct intervention from the central banks. Click here for relevant articles.  This last one was a blatant and direct intervention in free markets.

The question in everyone’s mind is whether relentless intervention and free markets are compatible. Obviously, markets are not free. Would it be better if markets were free? I really can’t answer this question. Probably some people would not be as rich and some corporations would not be as large but for the majority of hard working men and women it would not make any difference.

Relentless intervention by central banks reinforces “winner takes all” effect and empowers certain corporations to take over the world.

There are now a handful of corporations that make up about 70% of the U.S. market capitalization. This is not a free market any longer. In the 1980s, AT&T was broken up because it was allegedly too big but nowhere near the size of these corporations.

Interventions and winner takes all effect have scared people and investors to the point of finding refuge in convoluted schemes such as cryptocurrencies. Just search for “all-time high” in last 24 hours and the news is about bitcoin. You will have hard time finding a reference to S&P 500. This is because people know the stock market game is rigged but the insanity behind this will probably go unpunished.

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Charting and backtesting program: Amibroker

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May 26, 2017 at 10:15AM

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