Tag Archives: Gold

Calvin Screaming

Market Manipulation

Calvin ScreamingEvery so often I get thinking about The Manipulated Market. When markets defy logic to such an extreme degree only one of two explanations is possible. 1) Either your understanding of the forces that move markets is so fundamentally flawed that migrant farm work might be more rewarding; or 2) forces are at work which neither the press, bloggers, twitterers, or even Ben Bernanke have the courage to ‘expose’, question, criticize, regulate, or remotely ‘deal with’.

To Big To Fail = Big Enough To Manipulate.

We’re living through a sort of post 9/11 self-reflection while at the same time struggling with the contradictions of rising ‘wealth’ and shrinking disposable income. Capitalism is taking a hit, privacy is taking a hit, and the free market altar seems to be experiencing Alzheimers under stimulus ad infinitum. Some traders make every effort to avoid any and all ‘macro’ inputs to their trading strategy and focus only on: charts, price action, measurable ratios, divergences, volatility, etc. etc. etc. Those traders, presumably investment bank equity desks, and your friendly neighborhood algo are doing well… Very well.

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Michael Phelps - Olympics

Pre-Market Indicators August 1st, 2012

Good Morning NY.Michael Phelps - Olympics

  • EURUSD (1.2305) + 0.02%
  • Gold Futures (GC) still holding over 1600 ($1614.90) + 0.27% 
  • Oil Futures(CL) + 0.06%
  • S&P Futures (ES) + 0.25%
  • Europe: CAC40 + 0.25% FTSE + 0.28%
  • Asia: (NKD) + 0.58%
  • Corn Futures (ZC) – 0.53%

Pre-Market Indicators

This will be a crazy day, it already has been.

The first sign of wierdness are the CBOE Put/Call Ratios, here. The CBOE Index Put/Call Ratio has only been this low one other time since Jan 2011 and that happened on June 11th, 2012.

  • The EURUSD is now under 1.22 (-0.41%)
  • Asian markets are down with NKD 2.03% and HSI down -1.88%
  • Europe is down with the CAC40 -0.70% and FTSE down -.70% and the DAX -0.80%
  • Gold is off -0.80%
  • Oil is off -1.41%
  • S&P is off -0.75%
The only thing likely to change this trend will be very good initial and continuing claims numbers which come out at 8:30am EST. I can’t wait to see the VIX on open.
Good Trading

Pre-Market Chinindicators

The markets took a nice 1% pop this morning in Europe and duly followed with a 0.5% rise in the S&P Futures. I initially thought it was the formalisation of a $30 billion rescue plan and a deficit target extension announced for Spain. Alas, it looks more like the result of a meeting (strategic dialogue) between China and the European Union. That’s news worth fading.

This is the 3rd strategic dialogue in 3 years. I didn’t look at the market reaction to the others, but I’d bet the market bounced with a short half-life. 

Here’s the piece from AFP that caught my attention (in French).

On other fronts:

  • The EURUSD rests unchanched
  • Gold Futures are up slightly (GC) +0.3%
  • BOJ reportedly easing to overcome deflation
  • Grain Futures are pulling back a bit after yesterdays 5% rise
  • S&P Futures are on the rise (ES) +0.55%
SPY Chart 070312

Just sayin…

The levels were good, this is reassuring!

  • 138.22 — Thursday
  • 136.63 — Monday
  • 135.80 — Tuesday
  • 134.25 — Tuesday (ish)
  • 133.72
  • 131.50

I’m still following the ranges I mentioned (here), and will be adjusting my $SPY spreads if we move outside the 134/136 range.

SPY Chart 070312

If SLV breaks the $31.50 low I’ll be looking to get out of the SLV butterfly I spoke about (here). I’ll also be keeping a close eye on the VIX and GC_F.

Good trading.

Vacation

Inspiration After

It’s time to get back to work.

Top Tens and looking back on 2011 do little to inspire me. The markets felt very much like running circles in mud, any deeper analysis and I might as well be in 2011. I can’t say this better then Art Cashin (picked up from ZH):

A Year Of Commuting By Roller Coaster – In Wall Street watering holes, there’s been an old saw, used for decades, to demonstrate that statistics can be less than useful and sometimes misleading. The old saw is the fact that – mile for mile, the safest form of travel in the United States is riding a roller coaster. The point being that while commuting by roller coaster may be exciting, safe and even fun, it doesn’t get you anywhere.

The stock market events of 2011 reminded veteran traders of the old saw. There were stunning ascents, heart stopping plunges, mind numbing turns – and at the end – you wound up just about where you started and the ride cost you money. That was 2011 in a nutshell.

Friday’s action looked like the year in miniature. The first half was the best part, then a mid-session give up followed by choppy attempts at recovery, only to slump to a close. That put the S&P almost exactly where it had started the year.

Looking forward, this part of the year will be important for my little experiment.

Some time off, without that little voice in my head (not the crazy one) did me well. The visceral need to scan the headlines, dissect the marketing and political objectives of the latest popular talking head was as futile in 2011 as it was in 2010, or 1968.

Revision to the mean is a powerful concept, worth fighting but worth respect, equally. Are you listening Tea Partiers? 2012 will see your footnote written.

At the extremes, you could ‘check out’: plant carrots and raise sheep in Montana (think Gold, Guns and HHO). Or even ‘check in’: head down-chin up and dress spectacularly (think Goldman Sachs and Elections).

I’ll be selling/hedging/spreading the extremes in 2012.

Welcome back and good trading.

Conspiracy Edition

Normally, I stay off the conspiracy bus, especially the hard-core conspiracy bus. Conspiracies exist, ok, but contrived theories about September 11th being orchestrated by the CIA or ranting right wing radio stars, leave me shaking my head in wonderment. It’s like Fox-culture for fanatics.

Austin Powers

And since the sky is falling on the financial markets I think it’s time for a good conspiracy theory. There must be one on the near horizon. Financial markets are so globally intermingled, that the potential for active manipulation is growing obvious. The bond market has disposed of leaders in Italy, Greece and Ireland. Sequestered funds have supported uprisings in Libya.

In my youth, the world feared Hollywood, not Wall Street.

So if you’re guessing I’m going to point fingers at the Republicans, Congress, the Fed, the ECB, the IMF, the EFSF, or peripheral Europe, you’d be wrong. I admit those players are tempting targets. And though I was lead down that path given the flagrant corruption and self-interest, in the end I couldn’t point fingers at western politicians, for the following reasons:

  1. Conspiracies assume coordinated action
  2. An interest in a higher cause
  3. And a fair amount of intelligence

One problem with a conspiracy theory is that it’s interpreted, after the fact; 9/11, DSK, Roswell, WMD, Birthers, etc. Another problem with deconstructing a conspiracy is that it can/will be fully manipulated. Wall Street, the popular press, and politics are each positioning the story to his/her advantage. The Conspiracy has become The Story, therefore everything around it is fair game. Fine. That’s life, but what if we imagined the potential conspiracy of tomorrow by looking at the under-reported stories of today? Is there a major manipulation ‘en cours’, who’s holding back and why?

Today’s financial train wreck will be a player in my hypothetical future conspiracy but I don’t think today’s financial crisis will be The Story. It will be a major part of it, for sure, but today’s crisis has been more a comedy of errors; hardly intelligent coordination. The result of a self-serving private club that was/is getting richer and richer with little understanding of the power they hold in their hands. Now with that private club, coming under attack, we see signs of the broader impact of their arrogance. Who would have predicted Berlusconi’s resignation as a result of bond vigalantes? (I might predict his return when the bond vigalantes look elsewhere…) Few saw the housing collapse coming and that a loan in Poughkeepsie could bankrupt Iceland.

Some would say China has this figured out already, but I’d say only partially. Projecting influence is a relatively new game for China.

The impact of the markets on how the world functions impresses and scares me at the same time. Again, I think the time is ripe for some major manipulation. There is an ongoing conspiracy staring me in the face, I’m sure of it; so it’s my turn to contrive a theory.

The Black Swan has become a popular term, but I’m more interested in looking for something that’s sitting in front of me, not an outlier, so I extracted a few tidbits from the internet while searching for clues to a future event unknown to me, but known to someone. Obviously, more of an art than a science, and I’m doing this selfishly, for speculation (ironic?), and as a distraction…

I started looking at under-reported news, news that is swept under the carpet, misinterpreted, suspiciously left to die on the vine, or is largely ignored. This is my short list:

  1. Ron Paul
  2. Balanced analysis of the Middle East Iran and Israel
  3. Aljazeera
  4. Skrillex
  5. The Occupy Movement
  6. China, Myanmar, North Korea
  7. HFT
  8. Congressional Insider Trading
  9. Debt, Modern Finance, Market Behaviour
  10. Mars

That reads like a John Stewart brainstorm…

Might I find a future conspiracy by manipulating some of these subjects for some super-secret objective? If so what’s that objective and who’s doing the manipulating? Did someone conspire to unseat Berlusconi or was it just ‘the markets’? Either answer is scary and I’m reminded of a TED presentation on HFT but let’s assume it was ‘the market’. My guess is National Security Strategists (whoever they might be) are in a state of epiphany and studying the Italian case very closely.

We have a long history of trying to manipulate using ‘sanctions’ (through the UN as a proxy) against Iran, North Korea and Myanmar for example, but to support/manipulate other western countries through the manipulation of the bond market, that’s an eye opener. And what about Gold and the Venezualan repatriation? Chavez might be a paranoid megalomaniac but still, the only other example I found was Estonia in 1992.  The visibilities on American stockpiles are nearly non-existent and the falling confidence in fiat currencies, makes me wonder. Today for example the Bank of Korea increased it’s gold reserves by 39%, just this month. National Security Strategists pay attention.

Conspiracy theories related to monetary policy and investment bankers are recently very popular, much like fuckedcompany.com was during the internet bubble. I won’t add to that noise but if you’re interested in non-stop cynical commentary, ZH is a favorite place to read through a few.

So what might be the endgame here? To answer that question I think you need to answer the following: What elements of the financial markets are the easiest (least transparent) to manipulate as a proxy to meet a political objective?

  1. The Rating Agencies.
  2. The Federal Reserve Board. “The Fed” has a dual mandate described as a balance between price stability and full employement, and was established when congress passed the Federal Reserve Act in 1913.
  3. The Press.

There are two innate or base political objectives; the first, re-election and the second, wealth. Both mini-conspiracies are played out as political theater in Russia, the US, and in Europe this very moment. Maybe it’s unfair to call them conspiracies, but we can hardly call them fair and honest democracy, money and the press play a far too biased role. And yet this noise is probably a good backdrop for a larger objective.

On the cusp of the latest round of EU summits S&P offered another round of coincidences by warning 15 countries of simultaneous downgrade.

 “These observations arrive completely at odds with events,” said Christian Noyer, president of the Banque de France. “A very politically motivated action,” huffed Ewald Nowotny, the central bank governor of Austria.

I find it hard to deny that closed door politics are influencing S&P’s timing.

More later…