NASDAQ

Facebook shares took another hellacious dive last week when the lock-up period for insider selling ended on Thursday. Gluttonously coveted by investors in the months leading up to the IPO, the stock has become a pariah after falling 50% from its $38 offering price in May. Was it jinxed from the start, as some have suggested? It is indeed true that technical gremlins on Nasdaq plagued the order book the day Facebook went public. And although some sore losers have sued to get their money back (if not their hands, belatedly, on fire-sale shares) the exchange glitches seemed to us like business as usual. Facebook’s real problem is that it is just another Internet fad that will probably never earn a profit commensurate with the $100 billion valuation it was given by IPO buyers.

QE-on or QE-off; Growth or No-Growth; Cleanest 'Dirty' Shirt or Un-Decoupling; none of that matters. There are divergences everywhere - intraday and long-term - but none of that matters. What matters is hope, faith, and a little Central Bank charity. That is, of course, until someone drops the bowl of global Kool-Aid (Merkel 'nein'; Bernanke 'no'; Xiaochaun 'bu') or markets believe they want Romney/Ryan. With the equity markets in general making new 2012 highs today (as we noted earlier), on a day with better-than-recent volumes and heavy average trade-size at the highs, we can do nothing but stand back and admire the year-to-date performance of bonds, stocks, commodities, and verbal diarrhea.

Android is near 70% market share. At which point should one expect network effects to take over and push Android into the de facto mobile computing standard, much like Office is the standard for documents in the workplace?

How many muppets does it take to hold a half off Groupon sale on IPO stock??? Seriously!

The Financial Times published an interesting article on Wednesday by a Tokyo-based analyst with Arcus Research, Peter Tasker, entitled of 'Cash out of gold and send kids to college'. The article is interesting as it is an articulate synopsis of those who are either negative on and or bearish on gold. It clearly shows the continuing failure to understand the importance of gold as a diversification and as financial insurance. Tasker incorrectly states that gold is "just another financial asset, as vulnerable to the shifts of investor sentiment as an emerging market." He conveniently ignores over 2,000 years of history showing how gold is a store of value. He also ignores recent academic research showing gold to be a hedging instrument and a safe haven asset. Another fact unacknowledged is how gold has clearly been a store of value since the current financial and economic crisis began in 2007. Since then gold has protected people from depreciating financial assets (such as equities and noncore bonds) and from depreciating fiat currencies such as the dollar, the pound and more recently the euro. 

Exactly one year ago, the short-interest in SPY (the S&P 500 ETF) reached epic heights at over 536mm shares. At the same time, short-interest in QQQ (the Nasdaq ETF) also short-term peaked at over 116mm shares short. While QQQ has seen a gentle drift lower in general (somewhat reflective of trading volumes in the last few years), since July of last year SPY has seen a 62% drop in short-interest and QQQ 59%. QQQ short-interest is now its lowest since October 2000 and SPY short-interest its equal lowest since October 2007 and so ammunition for charging this market higher seems to be running out. This is even more highlighted by the 45% and 30% plunge in QQQ and SPY short-interest in the last six weeks alone.

While the attached interview between the Casey Report and HFT expert Garrett from CalibratedConfidence will not reveal much unknown new to those who have been following the high frequency trading topic ever since ZH made it a mainstream issue in April of 2009, it will serve as a great foundation for all those new to the topic who are looking for an honest, unbiased introduction to what is otherwise a nebulous and complicated matter. We urge everyone who is even remotely interested in market structure, broken markets and the future of trading to read the observations presented below.

Anyone who has had the displeasure of trading this market since the open will be well aware that the massive selling that started at 3:59:57 PM yesterday just as we showed, appears to have continued into today, after an algo, supposedly one impacting NYSE stocks this time, and proving that the entire market is a broken joke, not just Nasdaq and BATS, and one which is linked to Knight Capital, has continued this morning, sending countless stocks into the proverbial "batshit" formation, with moves of 10% higher and lower for no apparent reason. That's ok: the SEC and various other regulators are all over it, and will guarantee that the markets "are fixed." In other news, today we will report the latest massive outflow from domestic media funds. In the meantime, here are the first two picture of stocks getting pounded in super slo-mo courtesy of Nanex. Behold "perfectly normal" bids, offers and prints.

• Bundesbank’s Weidmann Says ECB Shouldn’t Overstep Mandate (Bloomberg)
• Hollande and Monti Vow to Protect Euro (FT) - be begging Germany to death
• Monti Calls French, Finns to Action as Italy Yields Rises (Bloomberg)
• not working though: Banking license for bailout fund is wrong: German Economy Minister (Reuters)
• Switzerland is ‘New China’ in Currencies (FT)
• Regulator Says no to Obama Mortgage Write-Down Plan (Reuters) - tough: there will be socialism
• Gauging the Triggers to Fed Action (WSJ)
• When domestic monetization is not enough: Azumi Spurns Calls for Bank of Japan to Buy Foreign Bonds to Curb Yen (NYT)
• Indonesia’s July Inflation Accelerates on Higher Food Prices (Bloomberg) - remember: the Deep Fried black swan
• China Manufacturing Teeters Close to Contraction (Bloomberg)
• Spain Introduces Regional Debt Ceilings to Achieve Budget Goals (Bloomberg) - yes, they said "budget goals"

Do you believe in miracles? Well, all those managers who were long the QE-sensitive darlings of Financials, Materials, and Consumer Discretionary into the month can breath a collective unchanged sigh of relief - thanks to last week's Draghi drag higher. The Energy sector managed a stupendous 4.9% gain on the month. The S&P 500, Dow, and Nasdaq all finished about 1-1.4% higher on the month (while Dow Transports ended -2.3%) as we came close to some Hindenberg Omens in the last few days. Today's market felt like the start of a sell-the-news day as we leaked back to the edge of the Friday cliff in S&P 500 e-mini futures (ES) - with an after-day-session-close snap down to catch-down to where risk-assets had broadly been biased all day - amid huge volume (leaving ES below its recent swing highs and Fibonacci levels). Commodities generally slid lower but WTI led the way ending down over 3% from Friday's close. Gold, Silver, and Copper all slid even as USD slid lower too. Treasury yields fell back retracing about half of the post-Draghi sell-off. VIX ended testing 19% into the close, up almost 1vol as the term-structure flattened ahead of the events of the next couple of days. The massive rip in volume at the close (and 5pt drop in ES) suggest plenty of short-term exits ahead of the fun-and-games of the next two days and certainly Treasuries were sending similar derisking signals.

Charts are saying higher, gut instincts are saying not so fast. 

Things have changed quite a bit. With Facebook's stock now at a 50% loss (measured against its high, set within minutes of the May 18th initial public offering), it's becoming clear that just about every entity - human, corporate, and the way things are going, perhaps even extraterrestrial - that touches Facebook gets the zap put on them. Off the top of my head:

When you can't act, you talk. Sure enough, here we go again:

• DRAGHI SAYS ECB WILL DO WHATEVER NEEDED TO PRESERVE THE EURO
• DRAGHI SAYS THE EURO IS IRREVERSIBLE
• DRAGHI SAYS YIELD DISRUPTING POLICY TRANSMISSION ARE IN ECB REMIT
• DRAGHI SAYS SHARING SOVEREIGNTY ON EU LEVEL TO COME
• DRAGHI SAYS LAST EU SUMMIT WAS MOMENT OF RECOGNITION

And of course the weak hands cover until they realize Draghi just said absolutely nothing, as at this point everything is  in Germany's hands. And not only has Germany not said anything, and won't until September when the constitutional court will approve or deny the ESM, but in fact they have been saying overnight that Spanish bonds are not eligible for EFSF purchases. In the meantime, Europe has devolved from a continent of coordinated action to coordinated jawboning.

Every day the Fed's control of all capital markets becomes greater and greater, and every day ordinary investors, and even habitual gamblers, realize they have had enough with participating in a rigged casino, in which the now completely meaningless and irrelevant level of the S&P or the DAX or Nikkei or the 10 Year bond is nothing but a policy tool in the global devaluation race to the inflationary bottom. And while we have shown the week after week of relenltess equity outflows as aging baby boomers call it quits and instead opt for return of capital (than on), the full impact of this boycott on Bernanke's usurpation of capital markets, in which a simple WSJ scribe can move the market more than the deteriorating fundamentals of the world's biggest company-cum-gizmo maker is best seen in trading volumes. Which as Securities Technology shows, are now down 19% in the first half of 2012. Of course, if one were to exclude the robotic presence in stock trading, which is anywhere between 50 and 70%, it would be a miracle to find any human beings still trading with each other.