HFT Mania, again, again and again
By Nanex.
| Below is a 100 millisecond interval chart of stock symbol PERY at 12:40:45 on October 4, 2011. There was a sudden drop of approximately 30 cents, followed about 40 seconds later by a sudden rally of approximately 45 cents. Trades are circles, and the NBBO is the shaded gray area. The sum of the trade volume shown in the left circle is 15,900 shares. The sum of the trade volume shown in the right circle is 15,940 shares. Coincidence? If not, does anyone have a hypothesis on what is going on here? This isn’t an isolated case. |
Yahoo on the move as talk of bid by MSFT
Talk out that Microsoft is about to bid for Yahoo. True or not, but it only took two days of raging bull to restart the M&A Activity.
Gold-Get back to getting long
BGC on Gold.
On August 11th , 2011 gold reached our year price target of $1,800 and accordingly we recommended selling gold and getting long gold miners through the GDX (a large liquid ETF tracking senior gold miners). Our rationale was simple – the gold rally had become over extended while gold miners had come to represent excellent value. Since then, the precious metals complex (gold, gold miners, silver and silver miners) has corrected violently as the “margin clerk market” drove investors to the sidelines. Gold has begun to consolidated at its 150 Daily Moving Average (DMA), a key support level, and we believe now is the time to put on or increase gold exposure. Our near term price target on gold remains $1,800/oz, though we may well probe the ~$1,900/oz level and possibly penetrate it before year end. We also continue to be bullish on the GDX and recommend initiating long positions here as well, noting that the GDX has more equity market correlation than gold but at the same time more upside for an end of year trade. Implied volatility levels for both GLD and GDX are at extremely elevated levels and these can be harnessed to generate compelling risk/return profiles using listed options.
You must remember what Keynesians forgot
Guest Post by WorldComplex.
One characteristic of time series that we have been able to study through reconstructed phase spaces is the concept of long memory. In principle, the future evolution of the state of a complex system is dependent on the entire past history of the system.
The prescriptions of Keynesianism in modern economics ignores the long memory of the system. Keynesians believe that application of policy A brings about response B. In a system with long memory, the response is also dependent on the previous history of the system–hence lowering interest rates in 2011 does not bring about the same response as lowering them in 2001–because the history prior to 2011 differs from history prior to 2001.
Market Collapse around the corner? Remember 2008?
If History is to repeat, we got the perfect short term bottom placed yesterday. In this move up, shorts will be losing faith in their positions, and cover furiously. The last leg up should take place over the coming days/ weeks, before we get the total breakdown of the “system”. Probable scenario or not, you decide, but the charts sure resemble 2008. For the full Chartology, check here.
SPX Weekly.
Below SPX Daily Chart.
Deutschmark & Drachma Revival?
What if Germany goes back to Deutschmark? Keiser Report reports.
Markets show reduced overvaluation
Is market reaching a somewhat more “realistic” valuation? Some charts below suggest that is the case. Courtesy DShort. Summary of Indicators:
● The Crestmont Research P/E Ratio (more)
● The cyclical P/E ratio using the trailing
10-year earnings as the divisor (more)
● The Q Ratio, which is the total price of the
market divided by its replacement cost (more)
● The relationship of the S&P Composite to
a regression trendline (more)
To facilitate comparisons, I’ve adjusted the two P/E ratios and Q Ratio to their arithmetic means and the inflation-adjusted S&P Composite to its exponential regression. Thus the percentages on the vertical axis show the over/undervaluation as a percent above mean value, which I’m using as a surrogate for fair value. Based on the latest S&P 500 monthly data, the market is overvalued somewhere in the range of 20% to 41%, depending on the indicator.
Early Chart Update
SPX Channel still intact, despite last night’s Panic buying. Market still bouncing back and forth playing with people nerves. Early morning action in Europe is rather dull, so far…
SPX Channel
News That Matters
Ft.com
European Union finance ministers are examining ways of co-ordinating recapitalisations of financial institutions after they agreed that additional measures were urgently needed to shore up the region’s banks. Although the details of the plan are still under discussion, officials said EU ministers meeting in Luxembourg had concluded that they had not done enough to convince financial markets that Europe’s banks could withstand the current debt crisis. http://www.ft.com/intl/cms/s/0/b1219a20-eeab-11e0-959a-00144feab49a.html#axzz1Zgu7c53P
Moody’s Investors Service late on Tuesday slashed Italy’s government bond ratings by three notches to A2, citing an increase in long-term funding risks for sovereigns in the eurozone who, like Italy, have high levels of public debt. The move was Moody’s first downgrade of the country’s sovereign debt since 1993, but followed a recent downgrade by rival rating agency Standard & Poor’s. Moody’s now rates Italy A2, which is parallel to S&P’s assessment of single A. Both rating agencies have a negative outlook on the debt, meaning further downgrades are possible. http://www.ft.com/intl/cms/s/0/c5e5de2a-eed4-11e0-959a-00144feab49a.html#axzz1Zgu7c53P
Jean-Claude Trichet has dashed hopes that the European Central Bank will ride to the rescue of the eurozone by pledging to backstop crisis-hit member states. In one of his last appearances as ECB president, Mr Trichet rejected the idea of the ECB acting as lender of last resort to governments. It was up to eurozone political leaders to restore investor confidence in Europe’s monetary union, he told the European Parliament. http://www.ft.com/intl/cms/s/0/07b5a996-ece8-11e0-be97-00144feab49a.html#axzz1Zgu7c53P
The chairman of the US Federal Reserve has accused China of damaging prospects for a global economic recovery through its deliberate intervention in the currency market to hold down the value of the renminbi, http://ftalphaville.ft.com/thecut/2011/10/05/693181/bernanke-criticises-china-over-currency-2/
All news continue.
With High-Speed Trading, the Market Cannot Hold: Mark Buchanan
For those who still believe, HFT is the best ever to happen, below some good reading. What happens next time? From Businessweek;
Last year, when the U.S. Securities and Exchange Commission came out with its final report on the flash crash, the stomach-churning event of May 6, 2010, that wiped $1 trillion of value from the markets in less than 30 minutes, it never managed to explain why the episode happened.
A large trade of stock futures by a Kansas firm had sparked it, the report said, and it detailed the ensuing chain of events, without offering much insight into why such a tumult was possible.
The report did say the activities of high-frequency traders, firms that use computers to buy and sell thousands of times per second, had helped the trouble spread. Investors today can’t be terribly comforted because hundreds of minor flash crashes involving only a few stocks at a time have struck since then. Earlier this year, for instance, the share price of an insurance company called Enstar Group Ltd. fell from roughly $100 to zero, then rose back to $100 in the space of just a few seconds. Since we don’t know what’s causing these sudden shifts, we can’t be sure that one as big as, or even bigger than, the May 2010 event won’t occur tomorrow, or next week.
Full article here.
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