The Four Stocks the Fed Uses to Ignite Rallies
Over the last few days, I’ve built the case that central banks are intervening in the markets – including the Fed. (If you have any questions about this topic, let me know here.)
And I’m not talking about manipulating the markets indirectly by cutting interest rates to make money cheaper… nor am I talking about providing extra liquidity to Wall Street via quantitative easing (QE) programs.
I’m talking about the Fed literally buying stocks outright – BILLIONS of dollars’ worth of interventions almost weekly.
The interventions are right there for anyone to see. Anytime stocks begin to break down… and then blast higher via indiscriminate buying on declining volume (shown below).
So how does the Fed actually intervene in the markets?
Does it buy every stock under the sun?
After all, doing so would require billions in capital for every intervention. And the Fed couldn’t get away with that for long without Congress getting involved.
So when it comes to manipulating the market, the Fed uses the financial system against itself.
Let me explain.
Fed Interventions Revolve Around the “Big Four”
The Financial Times recently reported that according to data from JPMorgan and Lucerne Capital, only 10% of stock market volume comes from actual fundamental stock investors.
The other 90% of all market trading today is generated by passive funds/index derivatives.
Meaning, 90% of trading comes from automated computer trading programs that buy stocks passively. These programs buy individual stocks or entire stock indexes without thinking.
Because of this, the Fed knows it only needs a significant percentage of stocks to ratchet higher to get the entire market to rally.
Once these few stocks catapult higher, these automated trading programs will start buying every stock in the index automatically – and that’s what causes the entire market to rise.
Put simply, the Fed doesn’t buy the entire market (all 500 companies that comprise the S&P 500). Rather, it focuses almost entirely on four specific stocks.
You may have heard of them before…
- Microsoft (MSFT)
- Apple (AAPL)
- Amazon (AMZN)
- Facebook (FB)
Together, these four companies account for over 10% of the S&P 500.
In order to get the entire market to rally, all the Fed needs to do is get these four stocks to move higher. At that point, the automated trading programs that comprise 90% of all stock market volume will do the rest, buying everything under the sun.
Playing Fed Interventions for Massive Profits
Ok… let’s take a quick moment to recap.
We know that central banks intervene in financial systems. We’ve discussed how both the Swiss and Japanese central banks have staged direct interventions into their markets.
We also know that the U.S. Federal Reserve stages similar interventions ― even if they’re not direct. And that typically, the Fed targets the Big Four: MSFT, AAPL, AMZN, and FB.
Simple enough, right?
Of course, knowing that these interventions exist is one thing. But the only way to act on them is if you know how to spot them.
Knowing in advance when these interventions occur opens the door to massive profit opportunities.
And I’ve found a way to do just that.
I’ll reveal everything soon. In the meantime, please send any questions you have about this incredible market anomaly here.
I’ll begin addressing reader questions as early as tomorrow.
Editor, Money & Crisis