Archive - Nov 4, 2015

the case really boiled down to just one thing: not whether it is legal to spoof, which it is and yet massive, well-connected HFT firms get away with it every single day, but whether it is legal to take advantage of HFT algos programmed to do just one thing - frontrun orders, and activity which leads to massive losses for the algos and the Citadels behind them, when the spoofer realizes just how dumb his counterparty truly is. The verdict was clear: nobody is allowed to outspoof the spoofers.

Never mind that one of the "smartest people in the room" just dumped 15% of his stake, Facebook fanboys are buying the stock's dip with both hands and feet... you can't keep a good momo stock down.

Crude oil algos traders are buying WTI despite DOE reporting the 6th consecutive weekly inventory build in US crude stocks (confirming API's build at 2.8mm barrels). Furthermore, for the 3rd week in a row, US crude production rose (back to one-month highs)... and then the humans appeared to read the DOE report and the selling began.

The current stock market melt-up hardly qualifies as limp. Even the robo-machines and hyper-ventilating day traders apparently recognize that their job is to tag the May 2015 highs and then get out of the way. So when and as they complete their pointless mission, the question recurs as to why the posse of fools in the Eccles Building can’t see that they are inflating one hellacious financial bubble; and that when it blows it will deconstruct their entire 7-year project of make-pretend recovery.

After US Manufacturing rose (Markit PMI) and dropped (ISM), US Services PMI dropped to 54.8 and has not been lower since January amid the weakest new order volume since January and poorest employment growth in 8 months. As Markit warns, "the survey data also reinforce strong arguments – notably a continued absence of inflationary pressures – that there is no rush to tighten policy." But then, just to top off all the idiocy, ISM Services surges from 56.9 to 59.1, smashing expectations confirming the "baffle 'em with bullshit" meme, as seasonal adjustments create a surge in new orders that was entirely not present in reality...

In one of four speaking appearances by high profile Fed officials on Wednesday, Donald Trump's favorite "politicized" central planner Janet Yellen is set to testify before the House Financial Services Committee this morning.

While FX volatility, and frontrunning mammoth central bank orders was clearly profitable to Virtu, many were wondering how would the recently public company return to its roots of making the most money in equities. Earlier today, when Virtu released its earnings we got the answer: as the chart below shows, while the market was plunging in the third quarter, Virtu was making off like a bandit, with revenue from American Equities soaring by 68% to $46 million in the quarter - the highest quarterly revenue in that category Virtu has generated in history!

After Draghi's moar dovishness yesterday, this morning's "meh" US data has sparked another leg lower in EURUSD (as December rate-hike odds rise modestly from 52% to 55%). EURUSD is now trading with a 1.08 handle for the first time since early August... more pain for US corporate earnings...

In the wake of a series of high profile headlines regarding egregious increases in the price of prescription drugs, Senators Susan Collins (R-Maine) and Claire McCaskill (D-Mo.), who together lead the Senate Special Committee on Aging, have opened a bipartisan investigation into pharmaceutical drug pricing. In the crosshairs are Valeant, Turing, Retrophin (founded by Shkreli), and Rodelis. 

This time is always different just before a bone-crushing decline.

Against expectations of a $41bn deficit, September's trade deficit was practically in line at -$40.8bn, dramatically narrower than the revised higher (less negative) August print of $48.02bn as petroleum imports plunge to lowest since May 2004. With the smallest deficit since Feb 2015, The Fed is going to need a bigger boat to have enough debt to monetize when the looming rate hike drags the economy to the point of requiring more intervention.

Having relatively disappointed all year, compared to 2014's high levels, ADP for October printed 182k (practically in with expectations of 180k and below September's revised lower 190k) - the lowest since July. Following September's biggest manufacturing job losses since Jan 2010, October saw further losses (-2k) and Services job growth slowed as small business gains dominated large business (which ADP reports facing strong dollar challenges). December rate hike odds were 52.0% before ADP with no significant change yet.

• Euro zone growth weak in October, China services rally (Reuters)
• Stocks Rise With European Bonds on Stimulus Outlook; Euro Falls (BBG)
• VW Sinks Deeper Into Crisis as Scandal Spreads to More Cars (BBG)
• Republicans ask IRS to audit Clinton charity's finances (Reuters)
• PBOC Inadvertently Boosts Stocks With Dated Zhou Comments (BBG)
• As China’s Economy Slows, Consumers Pick Up Some of the Slack (WSJ)
• Plane crashes in South Sudan, witnesses say dozens killed (Reuters)

"VW is leaving us all speechless."

“This can get pretty ugly.”