August 3rd, 2012
in Gary's blogging
Closing Market Commentary For 08-03-2012
It seems like all I have had to say is doom and gloom lately and I don't mean to say I am a permabear, just bearish. The recent gains have been great, only you can't play them with any amount of certainty. Only the recent declines have been visible in my trading sights and have proved to be profitable. The reversals upward have been pure speculation and not for this conservative trader. Do I think the markets will eventually head south in a meaningful manner, yes I most certainly do. The 'just when' is the part all of us have a problem with.
The market close up and near its highs. Volume was anemic and suggests DaBoyz and the HFT crown were the only ones trading and were able to run the markets up. A small amount of profit taking in the aftermarket and then became ghostly quiet. Monday is going to be interesting to see if this hot air bag can stay aloft.
I checked around and the feelings of the professionals I know is that NONE of us would even consider buying into today's market much less holding a short OR long over the weekend. If we had rules prohibiting transactions shorter than 6 hours would go a long way to stop market speculation. This rule would be great as I would not have to bother to come to work everyday and I could take longer vacations.
Some additional thoughts regarding the employment report this morning showing an additional 163,000 added to the roles last month in the US. This according to the 'squirrely' numbers the BLS puts out and is always revised lower. Reality check points out that is a measly 3200 folks per state as opposed to the MILLIONS still without meaningful employment. That means making enough money so they can pay bills and maybe even buy a home to replace the one they lost in the first place.
The $RUT at the close. Notice the triangle getting tighter. Because the small caps have not lead the large cap advances and continue to show weakness I am going to say we will have a breakout of sorts on Monday or Tuesday. Any bets for next week?
The 500 at the close. Had it broken down today I would have said it is game over, but it didn't. So now we prolong the invertible it seems.
The DOW at the close. Same comments apply here.
The SPY at the close. The Bollinger bands indicate some upside might not be in the making as it strays outside of the upper band.
The DOW at 4:00 is at 13096 up 217 or 1.69%.
The 500 is at 1390.99 up 25.99 or 1.90%.
The $RUT is at 788.48 up 19.88 or 2.59%.
SPY is at 139.52 up 2.88 or 2.11%.
The trend is up and the current bias is neutral.
WTI oil is at 91.36 trading between 87.32 and 91.68 and the bias is neutral.
Brent crude is at 108.96 trading between 105.84 and 109.10 and the bias is neutral.
Gold is up today at 1603.01 trading between 1586 and 1606.50 with a neutral bias.
Dr. Copper is at 3.36 up from 3.30 earlier.
Earlier the USD tumbled from 83.60 to 82.35 and stayed at 82.44 for most of the afternoon.
Read this morning where French President Hollande placed a tax on market purchases of 0.02% in hopes it will curtail speculative buying, obviously aimed at the HFT crowd.
The French parliament passed President Francois Hollande’s revised budget earlier this week. Effective from August 1, 2012, the budget law includes a 0.2 per cent transaction tax on share purchases. The transaction tax, which hopes to decrease market speculation, will be imposed on purchases of 109 French stocks with market values of over 1 billion euros.
Also along the same lines, HFT is getting the blame for the mini-flash last week.
Since closing last night, the stock of Knight Capital has moved by nearly 100%, touching on under $2 in the after hours session, and now trading well over $3.
The catalyst: a report by the WSJ that the firm has obtained a line of credit. Is this surprising? Not at all, and in fact is standard operating procedure by any firm which is buying hours of life in exchange for usurious lending costs.
None of this would have happened if, as we hoped 3 years ago, proactive steps had been taken to eliminate the threat of HFT.
Another timely article on HFT from Zerohedge.
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.
To contact me with suggestions or deserved praise:
Written by Gary