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Fed Shorting VIX Futures As Part Of Effort To Stop Market Crash – Dave Kranzler

Wednesday, June 29, 2016 12:28

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TND Guest Contributor: Dave Kranzler

All morning Fox Business has had a green banner posted that exclaims, “stocks stabilize.” So down 5% in two days followed by a 2.7% bounce in a little more than 1 day of trading is defined as “stabilizing?”

How about the fact that the S&P 500 was down 3.7% on Monday yet the VIX was down 8%?The only way the VIX can drop like that when the stock market is falling off a cliff is if the Fed is shorting VIX futures in large quantities. This theory is confirmed by the fact that the VIX futures shot back up after the NYSE closed on Monday, which can only be explained by after-hours short-covering. Let’s have a look at the trading log at the NY Fed to see what it was doing on Monday…

Yesterday’s spike up was accompanied by extremely low volume. The most heavily shorted shorts on the NYSE were the ones that were up the most on a percentage basis. Clearly this bounce is a hedge fund short-covering squeeze engineered by the Fed.

While the Fed can manufacture upside movement in the S&P 500 and Dow, it is helpless to prevent big sell-offs in certain sectors and stocks within those sectors. Nike (NKE) is down 18% from its 2016 high after reporting a big miss in revenues and orders last night. The entire retail sector as represented by XRT is down nearly 19% from its all-time high close last July. This action reflects collapsing retail sales – a clear signal that the economy is in a recession, notwithstanding the highly manipulated GDP data.

Several homebuilder stocks are well below their 1-yr highs from last August. Despite appearance of “healthy” housing market per the extremely manipulated housing data coming from the National Association of Realtors and the Government, the housing market is finally hitting a wall after being heavily stimulated by the Fed and the Government, with copious amounts of Taxpayer dollars.

When Freddie Mac and Fannie Mae roll-out zero downpayment mortgage programs for lower income “buyers” and when the NAR is spending millions lobbying for credit-relief for debt-riddled college grads, it is a clear sign that desperation has engulfed the housing industry. If the Government has to intervene in the housing market to the extent that is has since 2009, the housing market is anything but “healthy.”

Gold is hitting 18-month highs today because the gold market “smells” Central Bank desperation. It was clear from Draghi’s speech yesterday that the Central Banks are entering the final stage of the currency war: money supply hyperinflation. If you think the purchasing power of your after-tax disposable income is shrinking now, come report back in six months and tell me how it feels.

The Central Banks have painted themselves into a fatal corner. If they don’t hyperinflate the money supply, the markets will collapse. As the markets collapse, it will accelerate the ongoing global – including and especially the U.S. – economic collapse. At some point the situation will become completely unmanageable. At that point the stock markets will collapse and gold/silver will go parabolic.
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About Dave Kranzler:

I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics. Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund.