Keep in mind, correlation is not causation, but it has been our operating theory that as long as the Fed is printing, printing, printing, the stock market will be trending higher, higher, higher….
POMO = Permanent Open Market Operations
Federal Reserve Bank of New York: POMO – The purchase or sale of Treasury securities on an outright basis adds or drains reserves available in the banking system. Such transactions are arranged on a routine basis to offset other changes in the Federal Reserve’s balance sheet in conjunction with efforts to maintain conditions in the market for reserves consistent with the federal funds target rate set by the Federal Open Market Committee (FOMC).
Urban Dictionary: POMO – The mechanism by which the Federal Reserve manipulates the stock market. It is no secret that the Federal Reserve, and its now semi-daily interventions in market liquidity via POMO, is rather hell bent on creating the illusion that the economy is alive and well courtesy of a ramping stock market.
Courtesy of ZeroHedge
The central planner's policy tool formerly known as "the stock market" has experienced unprecedented levitation in the past two months on the heels of what, as shown previously, is some 38 countries concurrently pursuing negative interest rates and monetizing their debt, while flooding the market with record liquidity.
Furthermore, as we said back on January 9, now that the Fed is back to full scale unsterilized market injections in the form of good old POMO, anyone who wishes to challenge the Fed directly may want to reconsider doing so via stocks (buying precious metals on FRBNY, BOE and BIS-facilitated 8:00 am crashes is always encouraged). Recall what we said on January 9: "it may not be a good idea to be short stocks on any of the [POMO] days listed below." Below is a chart of what happened next: it shows the stock market's performance and whether or not there was POMO on that day.
In brief: of the 15 POMO days since January 9, the market was up 13 of them, or an 87% hit rate. Those who did not short January POMO at least did not lose money.
And since Goldman's Bill Dudley was kind enough to release the February POMO schedule, during which the Fed will add another $44 billion to Primary Dealer dry powder, not to mention some $40 billion in MBS, and since there is no stock market and hasn't been since 2008, we urge everyone to study the POMO table below and to not short the S&P on the highlighted POMO days unless they absolutely must. Of course, regular readers will know that since the summer of 2009 our active advice to everyone but the most habituated gamblers, has been to stay out of the central planner's policy tool formerly known as "the stock market" entirely.
February POMO schedule (via Fed):