Market End Day Even But Among Black Clouds

Closing Market Commentary For 08-08-2012

Markets closed up slightly under low volume that, of course, doesn’t give much credence to a market on its way up to new highs. So we settle for what it is and sit on our hands and wait for a signal. Just what that is I don’t have the slightest idea, but whatever it is will be know the moment it happens. Could be something from the financial calendar, a geopolitical event, escalation of saber rattling in Iran or just about anything you could imagine.

A very slow news day, low volume and the going-on’s of DaBoyz moving the markets from a few points down to a few points up and points of interest in between. I wouldn’t buy into this market with all the black clouds on the horizon.

Bret has some thoughts on the ‘black cloud’ items he doesn’t like in his article below.

This August Rally Is Living On Borrowed Time by Bret Jensen

“It has been one heck of a three day rally. However as we get close to new highs for the year, I think it is time to take some money off the table and even put on some new shorts on for more aggressive investors. This rally feels like a “melt up” on low volume that lacks a solid foundation.

10 things I don’t like about the market here. . . . .

There are serious pro and cons thoughts as folks react to this article. Generally, I have known all along the HFT and DaBoyz have really screwed up this market and will continue to do so until they are corralled.

The New Stock Market: Obscenely Volatile, Perfectly Inefficient And It Only Gets Worse by Nathaniel Crawford

In 2001 a revolutionary study was conducted by Professor JD Farmer of the Sante Fe Institute regarding how stock markets evolve.

After five thousand periods had passed, the oscillations were virtually gone, and the market looked as if it were rapidly approaching perfect efficiency.

But then, volatility suddenly exploded, and prices began to move chaotically. What had happened was this: as the technical traders became richer, their trades became larger, and the large trades started introducing their own movements into the price. These movements created opportunities for other technical traders to try to arbitrage the patterns created by their fellow technical traders–when the technical had finished lunching on the seasonal traders, they began to feed off each other!

Anyone who participates or trades in the oil market will tell you that demand/supply changes could not possibly account for these wide fluctuations in price. It was the result of a market controlled by HFT algorithms, quant funds, and momo traders. Instead of focusing on value, these market participants engage in predator behavior to take money from weaker traders.

We are now in the stage where volatility and market inefficiency explode as technical traders (e.g. quants, HFT, and momo chasers) determine price, leading to wide gaps between value and price.

In conclusion, the market is becoming more inefficient as HFT and quant traders create their own trading patterns, which cause massive distortions within financial markets. As the market ecosystem evolves, the weakest traders (real people) are increasingly seen as prey by the quicker and physically fit HFT algorithms.

The RRR** is remained very narrow throughout the day and continuing anorexic volume is not conducive for trading.

The DOW at 4:00is at 13175 up 7.05 or 0.05%.

The 500 is at 1402 up 0.87 or 0.06%.

The $RUT is at 800.16 down 1.18 or -0.15%.

SPY is at 140.39 up 0.07 or 0.05%.

The trend is neutral and the current bias is down.

WTI oil is at 93.39 trading between 92.83 and 94.60 and the bias is neutral.

Brent crude is at 111.96 trading between 110.80 and 113.28 and the bias is neutral.

Gold is up today at 1611.86 trading between 1604 and 1617 with a neutral bias.

Dr. Copper is at 3.42 up from 3.40 earlier.

Earlier the USD rose from 82.29 to 82.56 and settled at 82.38.

The 500 at the close.

The DOW at the close.

Rick Ackerman has hit the nail on the head as I share his thoughts. The Big Question is when?

Knight Capital: Just a Warm-Up for the Big One?

Anyone betting that the global financial system will continue to muddle along indefinitely deserves to reap the whirlwind that’s coming.  As the rest of us well know, the international banking system is being kept afloat solely by political lies, stupidity, corruption, greed and, most of all, egregiously misplaced confidence.

It would seem to be only a matter of time before the rotted timbers of this belief system give way.  But what will be the catalyst?  The possibility or even likelihood that the financial system will be toppled by some event no one was expecting. . .

@telegraph:

“Greece will run out of money when its debt comes up for renewal on August 20, and the Germans won’t cough up. But it is September that is likely to bring another critical moment for the single currency as Spain comes under renewed exposure.

The betting at the most senior levels of Government now is that Greece, Cyprus and possibly Portugal will be forced out of the euro, which would then clear the way for a German-led programme to put a protective arm around Spain.

The single biggest obstacle to economic growth in Britain remains uncertainty in the eurozone . . .”

** RRR = Risk Reward Ratio

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Written by Gary