4/2/14…high frequency hi-jinks

Quote of the Day from the Friars Club Encyclopedia of Jokes: “You have a cough? Go home, eat a whole box of Ex-Lax, and tomorrow you’ll be afraid to cough.” – Pearl Williams

Bloomberg Quote of the Day: “Life is a succession of moments: To live each one is to succeed.” – Corita Kent…not to be confused with Sister Corita

Bloomberg Top Stories:

*High Frequency Trading Invading Currency Market as Stock Volume Evaporates – told ya!

*Lewis-Katsuyama-O’Brien Rumble on HFT Is Just the Beginning – you bet it is…finally!!!

*Treasuries Decline With Bunds Before U.S. Data as U.S. Futures Fluctuate

*KKR-TPG-Goldman Said to Face 99% Wipeout in Energy Future Bankruptcy Plan – GOOD!!!

*Goldman Sachs to Nexans Fined $416 Million by EU for Power Cable Cartel – more good news!

*U.K. Yields Nearing Highest Level Versus Bunds Since 1990’s Cool Brittania – not rule Brittania?

*Chrysler Recalls 867,795 SUVs Worldwide to Protect Brakes From Corrosion

*Virtu Said to Delay IPO Amid High-Frequency Trading Furor Spurred by Lewis – they are one!!!

*Kenya to Create Sovereign Wealth Fund Before Oil Production Starts in 2016  – go Goldman!

*Greek REIT Said Seeking to Raise $1.4 Billion as Foreign Investors Return

*Housing Poised to Regain Status as U.S. Inflation Hedge – but look at inflation rate!!!

*Qatar Risks Losing LNG Dominance as Gas Drilling Boom Spurs U.S. Exports

*Billy Salomon Turns 100 as Wall Street Handshakes Give Way to Microseconds – new order

*Russia Pressure Ukraine to Disarm Nationalists as NATO Considers Response

*Sapin is French Finance Minister as Hollande Ex-Partner Royal Gets Energy

*Israel-Pakistan Peace Talks Founder as Abbas Revives UN Statehood Bid

*U.K. Nuclear Submarine Joins Search for missing Malaysian Jet on 26th Day

*Ukraine Sanctions-Aid Package Sent to Obama in a Rebuke to Russia’s Putin

Tuesday’s Market Summary:

Was yesterday’s April fool’s joke on TB?…or on you? Time will tell…always does. Modest gains across the board led by the Russell 2000 +1.7% and followed closely by the laggard NDQ 100 +1.6%, while the rest were up from 0.5% (Dow) to 0.7% (Nasdaq Composite. Only casualty was  Dow Utilities…the winner for Q1, -0.6. NYSE Financials closed strong again up 1.3% vs +1.1% (brokers +1.4% vs +2%; KBW Banks +1.2% vs +1.2%, and Nasdaq Banks +1.6% vs +1.6%). BofA was 2nd most active +0.8% vs +1.3% – to 17.34 two days after its first sub-$17 close in weeks.

NYSE Volume was steady and near average (3.3B vs 3.35B vs 3.5B average) while floor trades fell back to an average 724M shares vs 847M vs 639M shares. Advance/Declines and Breadth were positive but on both the NYSE and Nasdaq at +2.5x and +3.1x, and +2.6x and +6x!!! – that last one on Nasdaq Breadth is impressive and obviously due to the surge in the NDQ 100 (93:6 advancing!). New 52 Week Highs rose to a respectable 306 vs 226 vs 110, while New Lows remained weak and slipped to 30 vs 38 vs 56. Lastly, Volatility (VIX) dropped sharply again to 13.10 -.78 or 5.7% – two straight days below 14 for the first time in 17 sessions from a high close of 17.82 on 3/14 with an intraday high of 18.22. This could be quite a problem for bulls in three weeks – the next options expiration!

Overnight Comments:

Bonds: closed weaker again on the stock market rally? (10’s 2.75% vs 2.72%, 3/3 high 2.79%; 30’s 3.61% vs 3.56% from 3.73%). Overnight, lower and dropping: 10 yr 2.80% 3/8; 30 yr 3.65% -11/16; TIP 1.34% -13/16. Recent ranges: 30 yr high was 3.97% on 12/31; the 10 yr recent high 3.03%! Long TIP recent high was 1.64% The (record?) low of 0.36% was set on 4/5/13.  Libor update: 0.230% 3 mos, 0.328% 6 mos. –  new record lows set Monday: 3 mos  0.228%; 6 mos 0.328%! NOTE the Fed Funds rate has averaged 0.08% since 5/22/13 and is steady at 0.07% -0.09%. Foreign bond yields higher, Greece PLUNGING again…nice to get bailed out, right? Germany 1.60% +3; UK 2.76% +3 – recent high 3.03%! France 2.12% +3; Italy 3.32% +3; Spain 3.27% +3; Portugal 4.01% -1; Greece 6.09% -25!!! vs 6.37% vs 6.48% vs 6.54% vs 6.75%! yet another new post-crisis low!!! Recent range now 6.09% to 12.57%. Japan: 0.62% +1.

Gold traded down to $1277.40, lowest since 2/10, and closed only slightly above at $1280.00 -$3.80 and lowest close since 2/10! It has been in trouble since imploding a week ago, breaking all supports, yesterday was the fifth straight close below $1300 since 2/12!!! – off $105 in 12 sessions  following the reversal! On 3/17 it had a new recent high of $1392.60, highest high since 9/4/13 – that ended in an outside day and nearly a negative key reversal and has been down every day since!It had closed above the psychological $1300 every day since 2/12! …and above the 200 day since 2/14, which is now first resistance!!!. Jan. 2’s low was $1181.40 – A MULTI-DECADE LOW!!!  Psych level: $1300 res, AND technical res at the 200 day, $1300, then the 50 day, $1307, and the 40 day, $1320!!! Overnight slightly better at $1284.00 +$4.00 in an ‘inside’ session.

Crude plunged breaking par and all through all three moving averages! This, just three days after finally breaking above the 40/50 and 200 day m/a’s and hitting $102.24, highest since 3/10. It closed below par after just four days above at $99.74 -$1.84!!! It had been back above $100 for six days. The session low was $99.28, lowest since 3/21! On 3/10, it had a high of $102.82 then plunged below the 200 day! 1/14’s low was worst since 5/2/13: $91.24! The record high of $114.83 was on 5/2/11, the low since on 10/4/11 is $74.95: $93.60 is the midpoint!!! Recent rally high and close are $110.70 and $110.53 respectively. First RESITANCE is now the 50 day ($99.80), then the 200 day ($100.49), and finally the 40 day ($100.67). The recent range is $85.61-$112.24 since March 1, 2012. Overnight it traded down to $99.05!!! and is now $99.29 -.45….lowest since 3/26. Look out below!

Global equity markets little changed, ex-Japan which is strong! UK +0.2% vs +1% vs +0.3% vs +0.1% vs -0.6%; France – vs +1.1%! vs -0.1% vs +0.4% vs -0.3%; Germany +0.1% vs +0.7% vs +0.1% vs +0.9% vs -0.3%; Japan +1%! vs -0.2% vs +0.9% vs +0.5% vs +1%; Hang Seng +0.3% vs +1.3%!!! vs +0.4% vs +1.1%! vs -0.2%; Korea ++0.3% vs +0.3% vs +2.3%!!! vs +0.2% vs +0.7%; India+0.5% vs +0.3% vs +0.2% vs +0.6% vs +0.5%. U.S. equity futures higher in a narrow range which has become the norm: DOW +21 (range 44); SPX +1.60 (6); NDQ +7(14!)   

 

Some random thoughts:

(didn’t plan on writing but high-frequency trading is a threat to our markets. TB)

It is a disgrace to the financial services industry that WE, those in the business, turned a blind eye to high frequency trading and let it drive individuals from the market. Someone said more than a year ago that the market is now like the Indianapolis 500 with you driving the family car – you can get hurt and you most certainly can’t win. TB has been railing on this issue for over a year while Congress and the SEC –as well as Wall Street – sat on their fat, complacent asses!

Ah, but how to cure it…remember when stocks traded in eighths? How about requiring that trades, either on the floor or Electronic Trading Networks (ETN’s) be required to be in at least five cent spread if not ten??? That would make it risky to intraday trade and remove at least some of the advantage. TB is welcome to and requests your thoughts on this.

Note today’s headline the high-freaks have now shifted to the currency markets where they can inflict real economic damage! But wait…look at Greek bonds now trading at 6.14% down from 12.57% at the beginning of the crisis…that smells of their doing. Do you really think Greece is that much safer? This last move coming just since January 31, when it yield 8.61% – that is 247 basis points in three months??? That is 13-3/8 points or 18%!!!Do you really think this last ‘handout’ is going to fix the problem?

But here is the worst part of high-frequency trading: these are hedge funds! So? There are just a few hedge funds, right? After all, that is why it wouldn’t help the budget deficit to get rid of the carried interest provision which taxes ‘owners’ (not their traders who, when I asked them at first, didn’t even know the owners were treated differently), and instead of it being ordinary income, by merely putting it in the fund it is taxed at 15% (due to increase in cap gains this year 23%). Guess how much revenue is lost to the government…in income taxes, and medicare: $83 billion annually! Yet, Grover Norquist has convinced the lame brains in Congress that to eliminate this or any subsidy is in effect a tax increase…and those ‘idiots’ (all GOP by the way), signed a contract that they would not raise taxes and they are sticking by it. This oath to a guy who has no standing and whose goal is to see the entire government ‘fit in a bathtub’ until is goes down the drain’ and vanishes.

Good luck, America…and there is more…much more…so the next time someone says raising taxes on the wealthiest Americans (top 0.01%) wouldn’t solve any problems remember they are cutting programs that actually ‘help’ people to not tax them…and it is much bigger than you think!

Have a great day!

TB

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