SPY

Just as we warned, liquidity was incomprehensibly low today (below normal pre-market levels during the peak of the trading day) and the intraday whipsaws were meteoric as a closed cash bond market enabled the slightest twitch in USDJPY to send S&P algos into conniptions. Biotech crashed. Trannies were ripped ridiculously higher at the open - then collapsed into correction (-11% from highs); US Airlines have fallen for 6 straight days, crashing 17% (with today's 7% plunge - driven by chatter over airborne Ebola - its biggest in over years). Tresury futures implied a notable drop in yields across the curve (10Y -7bps at 2.21%, 30Y 2.97%, and 5Y 1.45%). The USdollar closed -0.33% led by EUR and JPY strength (but AUD surged 1% extending gains after China data).  Gold ($1234), Silver, and copper all gained on the day as WTI fell once again (despite some intraday strength in the middle of the day). Stocks "flash-crashed" on very heavy volume in the last 30 mins with VIX breaking above 24 (highest in 16 months). All major equity indices are now below their 200DMA with the worst 3-day loss since late 2011.

While Russia's economy is hurting, desperate to overthrow the tentacles of the Petrodollar, and is urgently pivoting toward Beijing, the cherry on top came moments ago when, as if to assure all involved parties that there will be enough capital support on both sides, the PBOC released a surprising announcement that the central banks of China and Russia signed a 3-year, 150 billion yuan bilateral local-currency swap deal today, according to a statement posted on PBOC website. Deal can be expanded if both parties agree, statement says. Deal aims to make bilateral trade and direct investment more    convenient and promote economic development in 2 nations.

With S&P futures liquidity at near record lows (but what about the HFT liquidity-providers?), it seems the major stock indices are extremely sensitive to any and every headline or JPY twitch. For the 4th time today (and Nth time this week), stocks have decoupled higher from a less exuberant bond market... every other time, stocks have recooupled lower... Fool me once, shame on you... Fool me 4 times, I am Gartman...

“I was bribed by billionaires, I was bribed by the Americans to report…not exactly the truth.” - Udo Ulfkotte, former editor of one of Germany’s main daily publications, Frankfurter Allgemeine Zeitung

Whereas two months ago Obama spent his 53rd birthday in the usual style, by playing a casual round of golf with his Hawaiian childhood buddies at Andrews AFB before escpaing to Camp David, tomorrow that other Cold War 2.0 nation leader, Vladimir Putin, will be celebrating his own birthday, the 62nd, in a way that is about as diametrically opposite as can be. As reported by RIA, the former KGB spy will spend the day in the Siberian taiga, a vast forested area in the northern regions of Russia covering hundreds of thousands of square miles, according to Presidential spokesman Dmitry Peskov told journalists on Monday.

Will Obama be the Commander-In-Chief Who Lets Ebola Infect America?

I don't want to spoil the revelations of "This American Life": It's far better to hear the actual sounds on the radio, as so much of the meaning of the piece is in the tones of the voices -- and, especially, in the breathtaking wussiness of the people at the Fed charged with regulating Goldman Sachs. But once you have listened to it -- as when you were faced with the newly unignorable truth of what actually happened to that NFL running back's fiancee in that elevator -- consider the following:

1. You sort of knew that the regulators were more or less controlled by the banks. Now you know.
2. The only reason you know is that one woman, Carmen Segarra, has been brave enough to fight the system. She has paid a great price to inform us all of the obvious. She has lost her job, undermined her career, and will no doubt also endure a lifetime of lawsuits and slander.

So what are you going to do about it? At this moment the Fed is probably telling itself that, like the financial crisis, this, too, will blow over. It shouldn't.

Understanding how the power structure thinks, and how it intentionally manipulates the emotions of the masses, is key to overcoming and rolling back totalitarian ambitions. Indeed, to borrow a term from Glenn Greenwald, “fear-manufacturing” has been in overdrive across the Five Eyes nations over the past several weeks, but nowhere is fear being used in a more clownish and absurd manner to strip the local citizenry of its civil liberties than in Australia.

The Russell 2000 is -7.5% from July highs, -3% in 2014, unchanged since last October and year-over-year small-cap performance is the worst since July 2012. Despite four valiant momo-pump efforts to rally stocks to VWAP (to cover institutional sellers), they just kept falling back to bond-market-reality as US equities decoupled lower from JPY after Europe closed. The USD closed unch (after major swings intraday around Europe's close) with GBP strength and AUD/CAD weakness leading it lower on the week. Treasury yields dropped 2-3bps across the curve (down 3-5bps on the week) and all below FOMC levels (30Y -11bps). Gold is now up 0.6% on the week with oil and silver rising modestly. Copper found no bid. Financials slipped once again (catching down closer to credit). On the day, the European close signaled risk-off and the ubiquitous Tuesday panic buying in the last hour lifted the S&P to VWAP before a very weak close "not off the lows." Dow down 100+ pts 2 days in row for first time since June. VIX closed just shy of 15 at 7-week highs.

First, led by a "British-speaking" murderer, ISIS released beheading videos of US journalists. Then ISIS releases video of a British journalist hostage 'news' report to expose "the truth," and now, Australian police have raided hundreds of homes foiling a direct ISIS provocation to publicly behead a random citizen in Sydney. As Reuters reports, more than 800 police were involved in the pre-dawn security operation in Sydney and Brisbane, which was described as the largest in Australian history. A 22-year-old Sydney man was arrest, after links were found to top ISIS recruiter Mohammad Baryalei that PM Abbot stated were "clearly designed to shock and horrify, perhaps terrify" the community.

Plus: Exclusive Interview with FBI Whistleblower

Forty years ago many Americans celebrated the demise of the imperial presidency with the resignation of Richard Nixon. Today it is clear they celebrated too soon. Nixon’s view of presidential powers, summed up in his infamous statement that, “when the president does it that means it is not illegal,” is embraced by the majority of the political class. In fact, the last two presidents have abused their power in ways that would have made Nixon blush.

When Lee Goldsmith drives by one of the many fake cellphone towers being discovered throughout the U.S., his $3,500 CryptoPhone 500 will immediately display the warning message in the thumbnail image to the left. When you drive by the same fake towers, known as “interceptors,” your run of the mill iPhone or Samsung Galaxy won’t alert you to any potential security breach. And that’s exactly how those people who installed these interceptors, whoever they are, like it. What Lee Goldsmith and other users of the CryptoPhone 500 have discovered while driving across part of America will shock and disturb you.

Summer is over and many Europeans may have to keep warm this coming winter by thinking about their summer holidays while wrapped in blankets, praying for a short winter or for the world to come to its senses. It both cases, they may well be disappointed. The never-ending conflicts in the Middle East, mayhem in Libya, uncertainty in the Gulf and a war in Ukraine are all going to take a toll on the energy supplies this winter. Result? Many cold Europeans, many angry Europeans and many very pissed off Europeans. And what does history tell us about cold, angry, pissed-off Europeans?