Here’s a nice chart from Olivier Jakob at Petromatrix, who is taking an increasingly broad view of market goings-on in his bid to interpret the energy complex — oil, gas, the lot — on a daily basis:
It shows, as he notes, the scale and increased frequency of the Federal Reserve’s permanent open market operations (POMO).
And with the energy complex increasingly tied to the cross-correlated world of equities and bonds, all this POMO activity is once again beginning to pervert markets, he says. Which may be creating a situation where what is bad is actually deemed good.
As Jakob sums up, with regards to this week (our emphasis):
This week will see the release of some important macro-economic data (ISM manufacturing) and it is a given that the Fed will be revising down their GDP forecast (expectations for a -1% revision) for next year. The problem is that the notion of incoming QE makes it harder to trade worse than expected numbers, under the principle that if the macro-economic data is bad then the probability of QE2 increases and it is harder to be bearish in front of that. The financial markets are supposed to be “free economy markets” but trading the real price of any assets is getting more complicated by the day when massive interventionist policies continue to loom left and right.
A very good point, that.
Related links:
All about the QE2 – double or quits - FT Alphaville
The Fed cometh like a thief in the night – FT Alphaville
Central banks are depressing (yields) – FT Alphaville