Attack Of The POMO Monster
In late 2008 The Bernank was not happy at all. The Fractal monster had become way too unpredictable and even worse – it had acquired a taste for prime rib steak. So it was time to create a creature ready to take it on – one that Banana Ben could strut around on a leash and use it to scare Congress every once in a while. After much genetic engineering its incubated nucleus was sent into the FOMC breeder which after a few weeks gave birth to what we now know as the POMO Monster:
Yes, there is a reason it’s got a green tongue – as its diet is a shredded bundle of freshly minted treasury bonds. Let’s look at our updated POMO consumption chart:
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And there you have it – the influx of cheap POMO cash continues unabated. And you know what that means for equities. If you need any further proof of that just look at yesterday’s Zero Lite signal:
Look at that yellow frame I drew. The blue arrows show a reversal from a -2.0 signal to the zero mark in 5 candles – that is 25 minutes on the ZL. That is highly irregular – especially since it’s basically a one way move – not jags or jitters.
That – right there – is POMO cash at work. The boyz dropped the tape to 1300, triggered a bunch of stops, and then ran the tape higher. That little dip last afternoon was classic in that it was followed by a gap open – ramp & camp – just like in the old days. If you were short yesterday you are feeling it in your groin area.
Especially if you were dumb enough to buy puts or calls yesterday as the 10% drop in vega would have taken your premiums to the wood shed. And yes, this is a first step toward a bonafide VIX buy signal. We need one close lower here and it’s off to the races – again…