It all looked so rosy just a few short hours ago. WTI crude has slipped from over $58.50 (once again testing that upper band of resistance) to back below $56 and down almost 2% from Friday's close (not stabilizing). While the S&P and Dow (futures) remain green, the Nasdaq has tumbled into the red on the heels of Gilead's weakness (the 6th largest name in the Nasdaq 100).
Despite the authorities' best efforts to keep everything orderly, we know how this global Game of Geopolitical Tetris ends: "Players lose a typical game of Tetris when they can no longer keep up with the increasing speed, and the Tetriminos stack up to the top of the playing field. This is commonly referred to as topping out."
"I’m tired of being outraged!"
With 4 seconds to the close of yesterday's epic trading session, someone executed over $200 million and 1,147 trades in SPY - the S&P 500 ETF - in one-second, lifting the price to a S&P level of 2,130. This massive-loss-making "fat-finger" - resulting in millions of losses - would normally be followed by "probes" from the exchange into "erroneous trades" and then rapidly accompanied by the exchanges busting all the losing trades. But not this time! In all other cases of fat-finger'd and busted trades, we have learned who the counterparty was - even Goldman Sachs was exposed after regulators DK'ed its busted trades several years ago. So, the question is - why hasn't the other side of yesterday's berserk "fat-finger" buying spree in SPY spoken out in anger that its massive money losing trade will not be DKed?
4 seconds before the close, one super-bullish algorithm exuberantly bought a massive $200 million worth of the S&P 500 ETF up to a 2,130 level on the index in one second... and no - it was not a fat finger!! It was 1,147 trades! Now who do we know that is an 'expert' in ETF trading?
The market is a giant living organism of human behavior and trying to predict what the market will do in two weeks, much less twelve months from now, is pure folly. However, by looking at the price trends, and using some statistical analysis, we can garner a view of the direction that the “herd” is most likely heading. There is a fascinating analogy in nature, called murmuration, that very much resembles the “herd mentality” in the markets.
... it remains to be seen if market bubblemania on the back of central bank multiple expanion around the world can thrive, especially as corporate cash flow (and revenue, and GAAP EPS) growth trickles to a halt, coupled with an energy and junk bond market implosion, but when it comes to Barron's covers top-ticking the market, it is never different.
You know 'the market' is laughing at you when...
- New Normal headlines: Global stocks up on hopes of China policy easing (Reuters)
- China inflation eases to five-year low (BBC)
- U.S. Lawmakers Agree on $1.1 Trillion Spending Bill (WSJ)
- U.S. Braced for Blowback as CIA Report Lays Bare Abuses (BBG)
- CIA tortured, misled, U.S. report finds, drawing calls for action (Reuters)
- CIA Made False Claims Torture Prevented Heathrow Attacks (BBG)
- Oil Resumes Drop as Iran Sees $40 If There’s OPEC Discord (BBG)
- OPEC Says 2015 Demand for Its Crude Will Be Weakest in 12 Years (BBG)
- Greek yield curve inverted as politics raise default fears (Reuters)
Stocks were modestly weak overnight amid poor Japanese, Chinese, and European data, but as soon as the US cash markets opened, stocks surged higher algorithmically testing up to unchanged briefly for the S&P 500 and squeezing small-cap shorts (as usual).. until Europe closed. Stock started to lose steam but once Nasdaq and Russell broke red, programs slammed stocks lower and despite a late-day bounce, stocks gave up all the gains from Friday's "awesome jobs data" and then some with Trannies and Small Caps worst. Momo names all suffered - most notably TWTR & TSLA. VIX broke above 14.5 briefly, closing up 2.4 at 14.2. Treasury yields plunged 5-7bps at the long-end (1-2bps at the short-end) flattening significantly. Credit markets were clubbed - with HYG taking the brunt and ending at Bullard lows. Gold and silver gained solidly (as USD slipped 0.3% led by JPY strength) as copper fell 0.5% and oil price crashed again. Markets turmoiled notably into the oil pit close (margin calls) and stabilized modestly after... but the S&P 500 still closed below its 5DMA.
We doubt anyone will find it one bit surprising that as Bank of America observes in its latest weekly hedge fund monitor, "S&P500 longs increase to six month high" with all equities bought. And alongside that, and confirming that the short squeeze in the Treasury market will continue indefinitely, "10-yr contracts were sold at a strong pace to increase net short positioning to largest in six months." Why? Because that imminent economic recovery which everyone has been betting on since the second half of 2013 is just not coming, seasonally adjusted low-paying temp, retail, teacher and secretary jobs notwithstanding.
- Welcome to the recovery:
- Oil Extends Retreat With European Stocks as Dollar Gains (BBG)
- California police, protesters clash again after 'chokehold' death (Reuters)
- Ruble’s Rout Is Tale of Failed Threats, Missteps (BBG), not to be confused with "Yen's Rout Is Tale Of Keynesian Success, Prosperity"
- Uber banned from operating in Indian capital after driver rape (Reuters)