Sideways Trading, Flat And Lackluster

Midday Market Commentary For 10-08-2012

Not a damn thing has happened since the morning post. Markets remain flat and in a narrow trading range. The volume is actually similar to last weeks averages, low but it hasn’t fallen on its face like I thought it was going to do this morning.

The algo computers must have taken the day off because I don’t see the markets being moved around, but them we still have the rest of the afternoon.

It appears the financial analysts out there are finally, albeit slowly, figuring out that we have a problem with the algo computers. What is important is that the algo computers has vast repercussions for the stability and the fairness of our financial markets, says Mr. Martenson.

Eric Hunsader: Investors Need to Realize The Machines Have Taken Over by Chris Martenson

High Frequency Trading (HFT) deeply concerns Eric Hunsader, founder of Nanex. He worries that today’s investors, our regulators, heck, even the HFT algorithms themselves — don’t fully understand the risks market prices face in the brave new era of bot-dominated trading.

For instance, Hunsader estimates that HFT algorithms are responsible for 70% (!) of all completed transactions on our exchanges, and for 99.9% (!!) of all exchange quotes.

The real action happens across fiber-optic cables, on racks of servers in cooled rooms; where an arms race defined by cable length and switching speeds is being waged.

The reality is that the machines have taken over. When you buy or sell a security, the odds are extremely high the other side of the trade is being placed by an algorithm — one that cares nothing for the fundamentals of the underlying instrument. It simply is looking to make a quick profit, oftentimes measured in fractions of pennies. And this has vast repercussions for the stability and the fairness of our financial markets.

Interesting article. One might pick up a few points.

Top 10 Scary Facts About Placing Stops

The RRR** was very narrow at the opening bell and remains so at the midday mark and any trades will probably end up on the unprofitable side as long as this market has low volume and remains flat. Swing trading is at your own risk and being the market is at a crossroads of sorts, I would prefer to sit on my hands rather than risk guessing incorrectly.

The DOW at 12:15 is at 13577 down 33 or -0.24%.

The 500 is at 1455 down 6.04 or -0.41%.

The $RUT is at 839.17 down 3.69 or -0.44%.

SPY is at 145.54 down 0.60 or -0.41%.

The longer trend is up, the past week’s trend is neutral to bullish and the current bias is down.

WTI oil started down today and is at 89.13 trading between 89.90 and 88.20 and the bias is negative.

Brent crude also started down today and is at 111.68 trading between 112.24 and 110.54 and the bias is negative.

Gold is down today at 1774.14, trading between 179.42 and 1766.75 with a neutral bias.

Dr. Copper is at 3.72 down from 3.76 earlier.

The US dollar rose from 79.40 earlier to 79.80 and is currently trading at 79.64.

@zerohedge

The World’s Largest Money-Laundering Machine: The Federal Reserve

The essence of money-laundering is that fraudulent or illegally derived assets and income are recycled into legitimate enterprises. That is the entire Federal Reserve project in a nutshell.

Dodgy mortgages, phantom claims and phantom assets, are recycled via Fed purchase and “retired” to its opaque balance sheet. In exchange, the Fed gives cash to the owners of the phantom assets, cash which is fundamentally a claim on the future earnings and productivity of American citizens.

Some might argue that the global drug mafia are the largest money-launderers in the world, and this might be correct. But $1.1 trillion is seriously monumental laundering, and now the Fed will be laundering another $480 billion a year in perpetuity, until it has laundered the entire portfolio of phantom mortgages and claims.

The rule of law is dead in the U.S. It “cost too much” to the financial sector that rules the State, the Central Bank and thus the nation. Once the Fed has laundered all the phantom assets into cash assets and driven wages down another notch, then the process of transforming a nation of owners into a nation of serfs can be completed.

Here’s the Fed’s policy in plain English: Debt-serfdom is good because it enriches the banks. All hail debt-serfdom, our goal and our god!

@telegraph:

Not exactly a glowing endorsement of the single currency’s situation from Olli Rehn, the European Union’s financial affairs chief. He says he’s “less pessimistic” about the future of the euro than he was earlier this year. He said:

We have enough challenges in Europe. Nobody is having any party mood but I am less pessimistic for the moment of the future prospects of the eurozone than, for instance, in the spring.

** RRR = Risk Reward Ratio

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Written by Gary