Despite more liquidity injections (CNY35 billion 7day RevRepo), archaic deals for brokerages to manipulate their balance sheets, and local reporters noting China's propaganda ministry ordering state media to publish only positive opinions about the stock market, not to criticize, Chinese stocks are in red once again. The record streak of margin debt declines continues and although futures were driven up early on, any strength has been sold into as unwinds wreak havoc on the ponzi wealth creation scheme. All major indices are in the red with Shenzhen (home of the 500%-club) the worst, down around 2% (though as CNBC would say "off the lows").
We warned previously that when (not if) the market crashes next, The Fed is going to need a scapegoat (other than British traders living at home with their parents) and judging by The Fed's Lael Brainard's comments today, high-frequency-traders (HFT) are in the crosshairs. Crucially, Brainard warns that HFT "may amplify market shocks," and The Fed is "studying possible changes in liquidity resilience."
With all eyes on Greece it would seem another crisis relating to unpayable debt is brewing in the Caribbean. The governor of Puerto Rico, Alejandro García Padilla, has warned that the island is unable to pay its debts of $72 billion.
As the shortened week continues ahead of tomorrow's payrolls print, and amid chaotic Greek headline-hockey, ADP and Challenger jobs data gives us a glimpse of what volatility lies ahead. After jumping a little last month, but remaining in weak territory, ADP printed 237k for June (beating expectations of +217.5k) in line with estimates for nonfarm payrolls. This is the best print since Dec 2014 but is dominated by small businesses with large companies lagging. Job gains were dominated by Services (+225k) with goods-producing fiorms gaining a mere 12k jobs. This comes after Challenger-Gray showed job cuts increasing 42.7% YoY in June and are at the highest level for June since 2009.
So much going on that by the time an article is prepared, everything has changed and it has to be scarpped. But, in any event, here is an attempt to summarize all that has happened in another turbulent overnight session.
The Greek D-(efault) day has arrived, and with it so has quarter-end window dressing for many underwater hedge funds (recall the S&P is now red for the 2015) which means the rumor mill today will be off the charts. And sure enough, less than an hour ago, futures exploded higher as did the EURUSD, following another "report/rumor" of a last minute detente between Greece and the Troika when Greek Ekahtimerini said that "Tsipras is reconsidering the last-ditch offer made by European Commission President Jean-Claude Juncker, sources have told Kathimerini."
On Friday morning, at around midnight PDT, the price of silver had a mini crash, dropping more than 10 cents in one second. This is our forensic analysis.
Whether, or not, a Greek exit from the Eurozone or a potential debt default is "the thing" that sparks the next major correction in the markets is unknown. Historically, such a widely "known" event is generally already factored into the markets and has much less of an impact when that event eventually comes to fruition. As Art Cashin suggested this morning: "I think China may be more important than Greece. Stick with the drill – stay wary, alert and very, very nimble."
The unanticipated recent Greek political news flow and consequent market stress are addressed in our portfolio construction by the resilience we built into higher volatility scenarios and unexpected sources of turbulence. Indeed, the risk is not so much Greece but the structural illiquidity of the market which will exacerbate any moves up or down which should be part of the equation.
Mainstream media-ites continue to believe that a long period of low volatility is a sign of market health. In fact it is quite the opposite. A sleep-walking market is a reflection of complete disregard as to risk. Markets enter such periods of complacency when there has been a long uptrend, with periods of very low volatility reflecting where the market has come from, not where it is going. Such periods are far more likely to be a sign of an impending trend reversal than of a continued uptrend.
At the open, Europe looked in the abyss, and with no help coming from China, it did not like what it saw: And then the answer came from the Swiss National Bank, which stepped in to prevent the collapse just as Europe was opening. Because seemingly out of nowhere, a tremendous bid came in to life the EURCHF, buying Euros (against the CHF and the USD) and selling Europe's last left safety currency. We now know that it was the SNB, the same central bank which is the proud owner of well over $1 billion in Apple stock.
Blockchain-based Derivative Contracts Allows Leveraged Forex Trading Where Brokers Fear to Tread Due To GrexitSubmitted by Reggie Middleton on 06/28/2015 10:18 -0400
A Grexit debacle easily highlights the advantages of trading throgh blockchain technology. Long story short - no FTDs, counterparty or default risk when trading forex pairs!
Upcoming risk - Instruments moving to 'Close Only' mode
Due to the uncertainty surrounding the ongoing Greek debt negotiations, and ahead of a potential announcement over the weekend that could lead to high volatility on the market, please be informed that we have decided to decrease your risks by temporarily moving all Instruments to 'Close Only' mode, from 22:30 GMT+3 on Friday the 26th of June 2015, until 00:30 GMT+3 on Monday the 29th of June 2015, trading terminal time.