Some short term chart levels below. As we suggested a week ago “markets will consolidate going into the last days of trading”. Not really unexpected, but could offer some good vol plays, as people soon will start puking vol, as juniors on the desks now all chant ”dude, the market is not moving”.
PIMCO’s not so rosy outlook of what to expect in 2012.
- As things stand today, it is more likely that the ECB will leap to a rescue only when it is too late. Absent any increase in private or external sources of aggregate demand, the eurozone economy will likely experience a recession in 2012.
- Chinese deleveraging and rebalancing could mean much slower Chinese growth and a smaller impact of Chinese aggregate demand on the global economy.
- We expect the global economy to grow by 1% to 1.5% in 2012. This is significantly slower than the 2.5% growth rate achieved in 2011 and the 4.1% rate achieved in 2010.
Probably the most important chart for anybody trading he markets actively. As we pointed out yesterday, NYSE and NYSE Arca have put forward rule changes when it comes to quote stuffing. This is probably the first step towards regulating the HFT space. We are pro technical evolution and computers aiding the Trading space, but we are not pro predatory strategies where the majority of quotes add no value, except for “stuffing” the market. Hopefully, the broken market will become less boken, and we regain real liquidity.
Chart below, courtesy of Nanex;
Despite the fact we had the Fannie Mae and Freddie Mac, Lehman and AIG, the “system” has not changed. It is still possible to not know where the money of MF Global clients is. Regulators are chasing, but are not catching anything. It is still astonishing, the MF Global “event” could happen. Regulators obviously do not talk to each other, and therefore there is nobody responsible. With regulators not able to keep track of where the money is, we can’t but ask ourselves how the regulation of the HFT will proceed? Video with Nomi Prins on the MF Global below;
The divergence between the Vix and Implied Volatility Skew continues to grow to levels greater than what preceded the July selloff in equities. That does not mean a similar selloff is a guarantee but it does mean the market is extremely complacent right now.
Both at the money (vix) and out of the money (skew) options are simply not being bought. In other words positions are not protected from downside risk which can lead to a massive spike in volatility and increased selling.
Is this the beginning of the regulation of the HFT space? With “new” players taking over the trading scene, somebody (powerful) must have put in some serious complaints with the exchanges. Both NYSE and NYSE/Arca are proposing new regulations with regards to “manipulative quotes”. Hopefully, the so far unregulated HFT predatory market will slowly get regulated, and eventually we will see the return of a functioning market with true liquidity. Full proposals below;
NYSE Proposal, click here.
NYSE Arca, click here.