8/23/13…an electronic nightmare

From The Friars Club Encyclopedia of Jokes: “They say the best exercise takes place in the bedroom. I believe it, because that is where I get the most resistance.” – Jeff Shaw

Bloomberg Quote of the Day: “A day without sunshine is like, you know, night.” – Steve Martin

Bloomberg Top Stories:

*Fed Burned Once Over Pending Taper Now Twice Shy Approaching Change to QE3

*Emerging-Market Stocks Rebound With Rupee as U.S. Index Futures Fluctuate

*Greifeld Says Nasdaq Trading Was Shut Down to Stop ‘Information Asymmetry’

*Reinhart Says Emerging Markets Could Get ‘Ugly’ as Capital Outflows Grow – !!!

* Fed’s Lockhart Says He May Back QE Tapering in September if Data Is Strong

*Summer Slowdown at Restaurants as Americans Skip Dinner for That New Sedan – !!!

*Bond-Shock Divide Reveals Worse Than 1994 for Fixed Imcome – ain’t that the truth!

*U.K. Government Said to Start IPO for $4.7 Billion Royal Mail Next Month – want it?

*Bund Returns Near Zero Highlight Germans Needing Real Yields – and Americans!

*Microsoft CEO Steve Ballmer to Retire Within 12 Months – breaking news!

*Ireland’s Zombie Hotels Revive or Die as Billionaire John Malone Checks In

*Italian Job Sneaks Manufacturing Plant to Poland Under Cover of Darkness – !

*Obama Says Alleged Syrian Chemical Weapon Use Requires Attention of U.S. – yawn!

*Boehner Assures Republicans U.S. House Will Still Keep Fighting Obama Health Law – and that folks is the problem…oppose but not PROPOSE something that works!!!    

Not going to bother even trying to decipher yesterday’s trading…it isn’t worth it. Volume was low…and that was on the NYSE – not the Nasdaq which had a tree hour ‘trading glitch’ for the second time in a week…this one caused by a ‘loose connection’? I’ve got your loose connection: it is the regulators who have allowed the markets to become more risky than the Indy 500! Is another ‘flash crash’ in our future? Could there be sabotage – you know like the Chinese pulling the plug that caused the problem? Just asking…Apple was up in the morning…went negative…then for three hours no trades and ended back up at the close…three hours…a lifetime to a trader! You decide!

…here’s the book:

* Dow 30 +0.4% vs –0.7% vs -0.1% vs -0.5% vs -0.2% vs -1.5%!!!; Dow Transports +2%!!! vs -0.6% vs +0.9% vs -0.7% vs +0.6% vs -1.1% vs -1%; Russell 2000 +1.4%! vs -0.7% vs +0.4% vs -1.1%!!! vs -0.3% vs -1.5%; Dow Utilities +0.7% vs -1.1%! vs +0.6% vs -0.9% vs -1.1%!!! vs -1.3%!!!; S&P 500 +0.9% vs -0.6% vs +0.4% vs -0.6% vs -0.3% vs -1.4%; Nasdaq Composite +1.1%? vs -0.4% vs +0.4% vs -0.1% vs -1.7%; NDQ 100 +1%? vs -0.4% vs +0.7% vs -0.1% vs -0.1% vs -1.7%. (indices with big moves in 6th day left in…note Transports to the 7th!)

*NYSE Volume collapsed to a very weak 2.53B shares vs 2.92B vs 2.97B vs 2.88B vs 3.14B vs 3.42B (2.52B is 4th weakest of 20131.96B is the low). REAL NYSE Volume dove to an extremely weak 573M shares – lowest since 8/5 vs 657M 619M vs 670M vs 835M vs 716M vs 588M (482M on 7/3 in a shortened trading session is the low). The 12-month average is 717M shares. The range since 6/28’s 1.75B share day, excluding the four sessions above 800M, is 482M-798M shares. The average since 6/28 is just 670M shares, ranging from 482M to 906M. There have been just SEVEN 1B+ share sessions! There have been 31 800M+ shares in 2013: 12 up, 17 down, and two mixed, but on trades of less than that 94 have been up and 43 down …the down days are beginning to steadily increase! There have been 33 mixed sessions.

*New 52 week highs have ranged from 33-864. They nearly doubled to 159 vs 88 vs 80 vs 72 vs 72 vs 62 vs 229. New lows were halved but to a solid 103 vs 205 vs 339 vs 579!!! vs 431 vs 510! vs 313 vs 262 vs 104 – 27 is the recent low.

  1. Advance/Declines were very positive for only the second time in in six days: +5.1x! vs -2.7x vs +3.2x vs -4.3x vs -1.9x vs -5.5x!!! (recent range -17.5x to +4.4x) on NYSE and +3.8x!!! vs -2.1x vs +2.8x vs -2.3x vs -1.2x vs -4.3x!!! (recent -3.5x to +3.8x). Breadth was similar: +5.5x vs -3.7x! vs +3.1x vs -5.8x!!! vs -1.9x vs -2.9x (recent -18.6x!!! to +6.9x!!!) on NYSE and +4.9x vs -2.5x vs +4.2x vs -2.6x vs -1.1x vs -7.7x!!! (recent -12.8x to +6.2x)  
  2. NYSE Financials rose by 1.1% vs -0.9% vs  +1.5% vs -1.4%! vs -0.1% vs -1.3%!. BofA was most active rising 1.5% vs +0.4% vs +1% vs -1.4%!!! vs +0.7% vs -1.3%, closing at $14.57 +.23. It has been weak since hitting $15.03 – 21 days ago – highest since Jan. 14 and major res. Brokers +1.2% vs -0.7% vs +1.4% vs -0.9% vs +0.3% vs -2%; KBW Banks +1.5% vs -0.7% vs +1% vs -1.3%! vs -0.3% vs -1.2%; Nasdaq Banks +1.4% vs -0.9% vs +1.4% vs -0.8% vs +0.2% vs -1.1%. Why was the financial sector strong on a day like that???  
  3. Volatility (S&P VIX) declined but only below 15 while the range came in just slightly to a wide 14.66-15.26 and closed at 14.76 -1.18. The recent range is now 11.83-16.56!!! VIX peaked at 20.49, plunged to 18.90 on June options expiry then closed at 20.11 on 6/24 and HAD been down below 14 since! 6/24’s session high of 21.91 was highest since 12/31/12 (22.72)!!! The range since April ‘12 is 11.05 (multi-year low on 3/14/13) to 21.90. It is above the 40 day (14.00), the 200 day (14.67) and the 50 day (14.81)…ytd the range is 11.05 (3/14) to 21.92 (6/24)!

 

Global stocks mostly higher with only minor weakness: UK +0.5% vs +0.9% vs -0.5% vs -0.6% vs -0.5%; France -0.1% vs +1.1%! vs flat vs -1.3%! vs -0.8% vs +0.1%; Germany +0.1% vs +1.1%! vs -0.1% vs -1%! vs -0.3%; Japan +2.2%!!! vs -0.4% vs +0.2% vs -2.6%!!! vs +0.8%; Hang Seng -0.2% vs +0.4% vs -0.7% vs -2.2%!!! vs -0.2%; Korea +1.1%! vs -1%! vs closed vs -1.6%! vs -0.1%; India +1.1%! vs +2.3%!!! vs -1.9%!!! vs -0.3% vs -1.6%! vs -4%!!!. U.S. equity futures little changed and back into a very tight trading range: DOW +7; SPX +1.50; NDQ +4.250 – contrast to its 18 point gain before the trading glitch ruined the day!

Bonds oscillated in a very narrow range yesterday and closed slightly better despite the Nasdaq’s 3 hour trading glitch and are slightly weaker overnight: 10 yr Treasury 2.90% -1/8 (recent range NOW 2.92% to 1.63%!!!), and the 30 yr range NOW 2.67% to 3.92%, currently 3.87% -1/16. The long TIP is 1.58% +1/32 The (record?) low of 0.36% was set on 4/5. Today’s high yield: 1.63%! Libor update: 0.262% 3 mos, 0.396% 6 mos, steady. Both remain near the Jan. 2010 record lows (0.245% and 0.382% respectively). Foreign bond yields mostly higher Germany 1.96% +4; UK 2.72% +1; France 2.50% +3, Italy 4.34% +3; Spain 4.45% -1; Portugal 6.43% -3; Greece 9.78% -3 vs 10.03%!!! +11 (but recovered late in the session) vs 9.83% vs 9.75% vs 9.58% vs 9.45% vs 9.46% vs 9.54%. Look at some of its recent big moves: 10.03% +11; 9.75% +24!; 9.64% -18; 9.81% -10; 10.02% +19; 9.95% +17; 9.86% -13; 10.02% -16; 10.27% -1; 10.33% -25!; 10.85% +28!; 10.54% +40!!!; 10.85% -37!!!. Recent range: 8.04% to 12.57%. Japan 0.76% +2.

Gold closed slightly higher at $1370.80 +$4.40  and has had five more or less parallel trading sessions with a high of $1384.10, highest since 6/18. 8/14’s session low was $1271.80 – lowest since 7/17! 6/27’s intraday low was $1179.40 – lowest since at least 2011 and now critical support. $1300 is psychological support, and it is above both the 40 day $1302 and the 50 day $1307. The 200 day is a distant $1520!!! Overnight it is up slightly at $1371.90 +$1.10. Crude closed higher offsetting Wednesday’s loss at $105.03 on a narrow ‘inside’ session – prior day’s low was $103.50. It is back above  the 40’50 day m/a’s (104.83/103.14). The 200 day ($95.08) is distant support. 4/18’s low of $85.61 was lowest since 12/11! Major Res is the high of $108.93 on 7/19! The range is $85.61-$109.32 since March 1, 2012. It is little changed overnight at $105.07 +.04.

Some random thoughts:

Shades of the flash crash but limited to Nasdaq 100 stocks mostly…isn’t that all that matters? In less than a week we have had trades entered by Goldamn that drove options prices on some stocks to $1…and then there was the China ‘glitch’ caused similarly by Everbright securities – oxymoron?

As if it isn’t bad enough that serious investors are being held hostage to high frequency traders who have the ability through their mutually inclusive algorithms…doesn’t an algorithm have to be based on some form of past experience? If so, the algorithms must have similar outcomes. All of which exaggerate both upward and lower moves, hence those big up moves on average volume at best, and huge declines when they pull their bids…or more accurately the algorithms do it. We have gone from investing which has ‘calculated’ or at least calculable risks to speculation which has near limitless risks.

Is this what you want? Apparently it doesn’t bother the SEC, CFTC, or Congress very much…they will, I fear, when it is too late and the ‘flash crash’ looks like a mere hiccup.

Remember there are NO computer errors…only programming and input errors. As Donald Rumsfeld said:

“There are known knowns; there are things we know that we know. There are known unknowns; that is to say, there are things that we now know we don’t know. But there are also unknown unknowns – there are things we do not know we don’t know.”

Hope you all have an enjoyable weekend,

TB

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