INtersting note on fed intervention in the market from a well known British analyst:
"Has the Fed intervened to prevent a rout in the S&P this week? - Peter Bennett thinks so. Watching the tape, he suspected the Fed bought on Monday, entering the market shortly before 8:00pm to check a rout.
I was sceptical, initially, believing that the Fed only intervenes when sell offs become panicky. However watching yesterday's action, strong buying on Wall Street commenced around 7:00pm, reversing a steep decline.
OK, the S&P was right on its 200-day moving average as you can see from this chart, and short-term indicators are oversold. While these factors were sufficient to offer some psychological support, yesterday's late rebound from within what looks like a rounding top seemed surprisingly strong, at least to me.
The move also produced an upside key day reversal on the S&P, marked by the red arrow, and also on the DJIA. This is often a tradable signal, and it also indicates a potential failed break of the March low. However the charts also reveal sufficient overhead supply to limit upside scope.
Some people are surprised to hear that the Fed intervenes in the US markets. However, a lesser know portion of the Fed's mandate is to help maintain orderly markets.
If the Fed did support the US stock market this week, I can understand why. Alan Greenspan would not want to see a stock market slump hit confidence and therefore the economy. I can also imagine John Snow making this point to the Fed Chairman, especially during an election year and when Iraq, the oil price and interest rates give investors plenty to worry about."
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