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The Market's Catch 22: Any Pick Up In Volume Leads To Immediate Elimination Of Bidside Order Books
As all financial service companies are making ritual sacrifices of lambs, goats, or virigns, whatever is cheaper to procure these days with rampant asset price explosions, to assorted gods that stock volumes finally pick up, the next chart demonstrates the very vivid Catch 22 that markets now find themselves in. To wit: every single pick up in volume, which means more than just the upward biased churn of the High Frequency Pirates, is immediately followed by a complete obliteration of the bidside order books, and a consecutive plunge in prevailing stock prices, especially in such ETFs (courtesy of record stock correlations) as the SPY and (synthetically) ES. Which is why the daily action since the beginning of September on less than miserable volumes is not an indication of any sort of buying interest, but a complete lack of trading interest. And any actual trading volume is always from a better seller. We hope that the brokers are positioned appropriately for that inevitable volume pick up, which however, will result in the market trading down quite promptly to late August levels, and, who knows how much lower.
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Doesn't get interesting until the 860-950 zone. Make or break, for a Loooooooong time that zone will be.
Won't get there. We're in a range with a bit of an upside bias right now. If this drops to 1050 area again, volume will shoot up with buyers coming in strong. Same thing over and over.
Is that you, Brian Sack?
http://www.ny.frb.org/aboutthefed/orgchart/sack.html
No. It's Leo.
Don't know if he's Brian or Leo, but I do know what he has been:
Right.
Go ahead and mope around about the end of the world. The rest of us will just keep on the gravy train fueled by the fed and, in case you haven't heard, positive earning reports.
I think it's worth pointing out the reality, as you did in a previous thread, regarding the recovery. I would like to use that link as pretty solid evidence that we are indeed recovering. Thanks for posting it.
http://www.bloomberg.com/news/2010-10-24/markets-smell-recovery-gaining-as-consumers-drive-retail-sales.html
Yep retail is quite excited here, buyers salivating for more 70+ P/E stocks to buy...baby its 1999 DotCom mania in the streets all over again! Catch the wave!
Error
What? Stocks go down? Are you sure about that? I've heard of rumors of this from my Grand-papy.
I've found it interesting that the HFT algo policy of stepping in front of sells orders has the effect of raising the price of the sale, thus partially papering over the tendency for selling to.....wait for it......lower stock prices. The constant lesson of these mini flash crashes is that every single HFT algo is programmed for self survival. They will not try to catch a falling knife once a threshold is passed.
This is why QE 2 is around the corner. More and more money needs to be flushed into the sewer just to maintain current levels. It's no longer about pushing asset prices up as much as it's about putting a floor under asset prices.
Alas, every junkie eventually crashes. The only question is if the junkie survives his own crash.
Depends on your level of protection.
My guess is Ben and Timmy don't have watermelon helmets.
So the monie is like the water that flushing out the oil in Gawar? Pumping/flushing out what is left.
Indices up, and banks down. Looks to me like the markets are pricing-in inflation. Yes?
Yes, the markets are pricing in inflation. That's why I keep saying it is insane to even consider a trade on the short side.
Name something that isn't 'priced in' on this market, and I'll show you what is Ben's next big purchase.
Ben doesn't buy gold.
but a lot of HF's have, so it is priced in whether it goes up or down ;)
HF laying claim on their trades? That would be a gooser!
I don't think the fed will allow stocks to decline. No matter what.
Amen my brother, And thats the bottom line. Please get this message out to everyone who still thinks this market is driven by actual traders, Market makers and volume.
I would love to see a live stream where the NYSE floor is filled with traders playing craps instead of trading.
Nope, what they pump, they must dump...no ones ever pumped a stock in perpetuity.
Same shit was being said in the dotcom bubble- 'Theyll never go down, thats impossible'...keep believing nothing ever goes down again I dare you.
...don't forget the housing mantra, homes only increase in value.
It will go down when Ben says it will go down; and not one second before.
This thing looks like it is a long, long time away from any sort of crash. Corrections, sure, but go ahead and short on margin; I dare you.
but...but, this time is different.
Chart: ES and ZB
http://99ercharts.blogspot.com/2010/10/es-zb_2178.html
http://www.zerohedge.com/forum/99er-charts
TPTB only need to keep this going one more week until the election is over...
Then, TPTB need to set up a dramatic drop that will have two results:
1) "Investors" take profits, generating Cap Gains taxes for 2010 (since income tax receipts from 15M new McDonald's, Wal-Mart, Dollar Tree, etc. workers are negligible).
2) The new Congress will be forced to get serious about fiscal reform and acting on the Obama deficit commission report that will be released in early Dec. Without a crisis (stocks plunging), no action would occur on deficits until after 2012 election.
And if fiscal reform occurs, "crazy" Ben can relent on the size and duration of QE2 and the destruction of the dollar.
I'd say as long as BAC stock keeps getting obliterated, that will be reason enough to implement QE2 with full force and fury.
Hmm, give BAC a few trill, see if anyone notices....
HFT-bashing. The new faith-based religion. HFTs cause constant ramping. HFTs cause flash crashes. HFTs are sucking unearned money out of the market, taking it from legitimate investors.
These are mutually contradictory!
If HFTs close out their books at the end of the day, if they aren't just buying and accumulating more and more and more stocks, then they can't have a net impact on price. Every buy is balanced by a later sale.
Likewise if they were sucking money out of the market, that would cause an erosion of prices--unless new money were flooding in at an even greater rate.
HFTs are the new market makers. They are as ill-loved today as the original market makers were in the London coffee houses back in the day. "Jobbers" they were called then, which was a derogatory term.
Aside from this comment contradicting around 150 posts of factual information to the contrary, one distinct difference is that due to generous liquidity rebates, HFTs have an embedded interest in trading even at a loss, as the end of day fund transfer from the NYSE/Nasdaq offsets losses on stupid trades, as long as upward churn was sufficient.
Bring back the jobbers I say. At least you could look them in the eye when you put on a trade and they were there the next day and the day after so they had their reputation to keep up. The HFTs are faceless behind their nanosecond screens and the regulators actually condone the edge they have to make their profits. You couldnt make it up...If the sheeple understood what was going on we'd have a proper "tea party" and they would all end up in the Hudson.
Technology has brought us immense gains in productivity but what we have now is one huge rigged game. The sad thing is that many "professionals" in the industry still pretend that it's business as usual. GS may be in the van but it permiates all the way down. To paraphrase CD the thought police have too many people by the scrotum. Regrettably ZeroHedge doesnt even provide a light at the end of the tunnel...yet.
The public chases price.
All the algos need do is front run any of their orders then finally dump its inventory on the slow bid.
HFT do not have consciousness, never mind consciences. These entities are in charge of the money supply (along with pip squeak Ben), price stability, and what not. It is a very dangerous thing to have programs dictating markets.
Especially algos that factor in the potential "irrationality" of other market participants such that buying and selling decisions are functionally irrational. I've dubbed this "efficient insanity".
http://thespiritoftruth.blogspot.com/2010/10/efficient-insanity-on-wall-...
That reminds me of an article I read where psychologists figure it is not the monie that gamblers (and therefor investors) are after the the thrill of the chase; almost winning the big one.
Oh good, I was worried the hedge funds weren't getting their say. Poor HFTs! They don't mean to impact much of anything at all!
Friday's [SPY|QQQQ|IWM|*.*] volume was so low, I thought Columbus Day must be celebrated twice in October.
Chart: Dollar
http://99ercharts.blogspot.com/2010/10/dollar_6168.html
The big moves being made now.
The market is dead. Case in point, VIX up, stocks up, dollar down. Since gold moves with more strength on a stronger dollar now, than a weaker one, the financiers have the best of both worlds: Steady Dollar devaluation, while gold moves up only marginally; here is your new trend. Now with negative spreads here, all we need is the VIX to lead the charge on 36,000. Volatility to put the nail in the dollar's coffin!
Algos are keeping ES/AUDJPY in a lockstep today. Those spikes of activity - desperate attempts to close any gap there is.
Watch for the divergence play usually coming right about..now:)
have you thought about what's the critical amount of daily divergence beyond which ES becomes unsustainable and snaps right back to AUDJPY?
Interesting - something like a % where traders notice the divergence and jump in bringing them lockstep back in line. Since the AUD is a commodity-based currency, and most divergence occurs after around 1pm EST, it might be interesting to investigate whether it has to do with reduced trade from the Asia Pacific region (besides the unsleeping algos) or the closing of a commodity exchange back home.
well, 1pm at New York is 2am at Tokyo. can't really see humans trading at that time. check this out: Oct21, around 11:10am ES is ahead by about 0.4% then it violently sells off. 1:20pm - same thing, ES gets ahead by 0.4%, and another sell-off. I see a pattern.
It would seem that eventually, there will be some huge panic, which drives the dollar higher, as frightened investors run to the currency and bonds - as a safe haven, and eventually, that move will take the legs out from underneath the equity markets in a big way. All of the "dark" pools will dump their orders and there will be no bids.
That is so 2008.
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That's too funny.
ssssssSinking fast-0.501% VALUE: 77.084 USD DOLLAR INDEX SPOT(DXY:
BTW: Technically, and I hope Nic is reading this, if SPX holds above 1187 today, there is little doubt in my mind that we will challenge the yearly highs very soon. Nothing overhead as resistance could catapult this quickly up through 1200 to close this year on the highs.
I wonder.
Surely if the SPX heads to yearly highs, these will be great stories for the MSM and maybe catch a few retail folk to step in as they 'missed the moves' from September onward...
Bingo.
The Fed, monied class of this country need some suckers to purchase a rather large sack of fecel matter. The market will keep going higher until the retail suckers jump back into the market or the elites panic as they begin to shank one another.
That's too funny.
And of course there is always the fed put...
The new norm is now
Love it or leave it..