FSU Contributor: The Secret Rescue Part II by John Tyler 05/11/2004

THE SECRET RESCUE PART II
And The New Respectability of the BIS
John Tyler
CEO infognome.com & Co-editor trader007.com
May 11, 2004

"Fortune Favors the Informed"

In response to the last article,” The Secret Rescue”, I have had a lot of interest in the role of the BIS and particularly their market activities.

I have no special inside knowledge. I simply analyze charts and technical data and query any apparent anomalies. When one sees coordinated action, expertly executed in the background, one suspects a strong moderating hand. The greatest anomaly is why we haven’t seen a total destruction of the US dollar (thankfully!) and widespread financial contagion, despite the dire warnings of Dr Doom, Prechter, and the Austrian Economic School acolytes.

The other point that was implied in my article was that the BIS cannot only act on its own behalf, but has the support of all the G7 treasury trading desks!

The article was designed to show apparent intervention to avoid a specific crisis, in this case an oil shock. The BIS doesn’t hold stocks of oil—as far as we know—so they are unable to flood the market with supply, as they are able to do with gold. The best way open to them is by currency manipulation in the short-term and beneficial arrangements for the oil producers, such as the Saudis.

The BIS are experts at what they do and the desired effect has been achieved—so far any way. The Saudis have offered more oil and currency shifts have kept the lid on the $US oil price.

Several readers, who were interested in any further charts that demonstrated this, shall restrict these further examples to this current event.

The following block of charts are June 04 futures contracts, daily have not included the $US/yen chart. Focus on the last 2 bars on the right of each chart.

Note that with the oil chart, there was a gradual uptrend and a down bar only after the currency moves.
The UK pound gapped up in the lead into this period, and being oversold on its momentum indicators, looked ready to continue a push up. Instead, we see a high range outside reversal day.
The Swiss France was already falling, but appears to have received a helpful push.
Push came to shove with the Euro and Euro dollar. Of special interest is the US $ Index that acted as though traders had prescience of the impending burst upwards of the $US. The Index decline halted 2 days before the major moves and volumes started to increase—all hallmarks of a well-run and disciplined exercise. Perhaps a few operatives on the inside are not above playing the index! …or perhaps it’s the trading operations of the BIS itself to make a few hundred million on the side.

The second block of charts shows where the real drama is generated. These are hourly Forex charts:

These charts have the advantage of running a 24-hour cycle, so we can see how well the operation has been coordinated.

Notice how the Euro/$US was run up first, crossing intra-session resistance levels to trigger day traders' stops and then sold off aggressively.

We see the same pattern with the $US: Yen and $US UK pound—a sell off opposite to the intended direction of change.

It is these moves counter to the trend change that teach day traders a lesson they won’t forget and reap mega profits for the market movers!

It is these moves across multiple currency markets that show the strong hand that is well beyond the power of even the large hedge funds, and probably counter to what the hedge funds were expecting.

I hope that this satisfies the curiosity of those who asked to be shown more of this Fairy Godmother. There will be many who cry foul and who lose through the operations I have mentioned, but in this case I believe the greater good has been served. The BIS is earning a new respectability!

Finally my sincere thanks to the team at FinancialSense.com who give a voice to our cries in the wilderness. Special appreciation is given to Mary Puplava who edits and posts my ramblings!

© Copyright 2004 John Tyler. Either one of these articles can be copied and reproduced as long as acknowledgment is given to the author and a link to www.infognome.com is included. Disclaimer: These are personal views and not intended to replace professional advice. We make no claim to be licensed.

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