Make or Break-Chartology
With Markets falling hard in today’s session, let’s review some important Index Charts. We wrote of the big sell formation last week. We are now trading on those support levels. Will the market fool everybody again, bounce up, and confuse both bulls and bears?
As HFT are dominating all trading, we might just get that flash crash again. Market is sitting on critical levels, especially the SPX. Below charts with important levels to watch. Make or Break, yet again.
SPX sitting on the Edge….
All charts continue.
High Freak Volatility
| Another great report on the Great Economic Benefit of HFT….By Nanex.
On October 3, 2011 beginning at 11:10:00.450, in the stock CA Technologies (symbol CA), a bizarre interaction between multiple HFT algorithms caused a wild oscillation in the NBBO with over 1,000 trades executing in a 35 cent range. Just before and after the event, the bid-ask spread was a narrow 1 cent, and trades executed normally in a 1 cent range. Essentially HFT caused the bid-ask spread to widen from 1 cent to over 35 cents in the blink of an eye.
During the event, the quote rate exceeded 25,000 quotes/second, which caused significant quote delays of up to 500 ms for this stock (and probably others processed on the same exchange equipment). Note that this is similar to an event which occurred in YHOO that we described as HFT trading faster than the speed of light (satire). |
Channel Intact as Markets trade lower
As Markets tank during the US session, below is a quick update of where we trade. Channels still intact, as markets drift lower. SPX taking out new lows, as DAX future trades on this mornings low levels.
Short selling Bans and the Negative Effects
Ban short selling, ramp up the markets, and the Economy will get the quick fix, or? Well, according to the NY Fed, it is not that easy. Politicians do not understand what banning short selling actually does to the market structure, as liquidity becomes scarce and institutions can’t price risk effectively. It all sounds great when you say it, but, it does not work. Bedtime reading for some of the ministers of Europe. Maybe time to impose Long Bans? From New York Fed.
In response to the sharp decline in prices of financial stocks in the fall of 2008, regulators in a number of countries banned short selling of particular stocks and industries. Evidence suggests that these bans did little to stop the slide in stock prices, but significantly increased costs of liquidity. In August 2011, the U.S. market experienced a large decline when Standard and Poor’s announced a downgrade of U.S. debt. Our cross-sectional tests suggest that the decline in stock prices was not significantly driven or amplified by short selling. Short selling does not appear to be the root cause of recent stock market declines. Furthermore, banning short selling does not appear to prevent stock prices from falling when firm-specific or economy-wide economic fundamentals are weak, and may impose high costs on market participants.
Some signs of reversal in the Market?
Markets are rallying after today’s ISM figures. As we wrote earlier today, we reached some support levels this morning, as equities traded on very light volume. Currently both DAX and Stoxx 50 are flirting with negative trend lines formed over the past days. Today’s action might form a hammer, and we get another mega squeeze set up. We will be back with more charts later this evening. For now, some important levels to keep in mind. Note the wedge in Morgan Stanley. It has gotten a lot of beating lately , and could bounce aggressively. Below Dax etc.
Blame the Fed
Stockman on the Economy, Fed and some more. By Martenson.
He sees the monetary systems of the world coming apart. How did we get here? He identifies the root cause as the intentional over-leveraging of world economies by central planners in a misguided effort to enjoy growth without consequence.
On the Fed.
As far as I’m concerned, Bernanke is the monetary Darth Vader. He has destroyed the bond market. Because fundamentally, in a healthy capitalist system, the interest rate in the money market and in the longer-term capital market is the price of money and the price of capital. And if the pricing system isn’t working, if it’s been totally crushed, disabled, manipulated, rigged, medicated, everything that the Fed has done with QE1, QE2, zero interest rates, Operation Twist – all the rest of this insanity – then we’ve destroyed the ability of the capital market to function and we’re giving false signals in every direction.
Full interview here.
Mid Day Update
Markets trading in tight channel as of this morning. Pathetic volumes so far.
Stoxx 50.
Eurozone in two Charts
Two Charts explaining the EuroZone situation, the ECB and why we have Risk Off markets nowadays. We wonder where these assets are marked? Presented without comment, courtesy McDonough.
and the Periphery Yields trending higher, despite….
Early Charts Update
The Markets are opening in negative territory this morning. Renewed fears over Greece, the Euro together with Asian fears drag risk assets lower. As volume is very thin, and we approach short term support levels, we might as well bounce on intraday levels, but don’t get too exited. Note Hang Seng is -4,7%. Below some early charts.
ES Futures. Negative trend intact on the 10 day chart.
News That Matters
Ft.com
The arrest of more than 700 protesters on Saturday has drawn worldwide attention to Occupy Wall Street, a fledgling protest movement modelled on the Arab spring, protests in Greece, and demonstrations in the state of Wisconsin earlier this year, http://ftalphaville.ft.com/thecut/2011/10/03/690706/arrests-draw-attention-to-wall-street-protests/
Eon, Germany’s largest utility, has recruited Goldman Sachs to run a sale of its gas distribution network in a move that could raise up to €2.5bn to help pay down its debts and further shift its focus away from Europe, http://ftalphaville.ft.com/thecut/2011/10/03/690676/goldman-to-run-eon-gas-sale/
Concern is growing in the Treasury over the “very, very great” risks to Britain if the euro breaks apart, the FT reports. “From the modelling we have done, the uncertainty [about the single currency] is already affecting the recovery and the risks [of a break-up] would be very, http://ftalphaville.ft.com/thecut/2011/10/03/690641/treasury-fears-effects-of-a-euro-break-up/
Japan’s quarterly Tankan index of sentiment at large manufacturers rose to 2 in September from minus 9 in June, Bloomberg reports. The reading remains below the March quarter figure of 6, but a positive number means optimists outnumber pessimists. Japanese companies have been restoring operations after the quake and tsunami disrupted supply chains, http://ftalphaville.ft.com/thecut/2011/10/03/690596/japanese-manufacturing-sentiment-improves/
All news continue below.
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