Monthly Archives: April 2013

Apple Pie – Bank Heist

bonnie and clydeI was wondering about insider trading today. Just a thought; a handful of people, Apple insiders, who are at this moment fully aware of what the market will do in 1 hr. Not just Apple. Lets say you’re in the know for the earnings which are due short(ly). Obviously you can’t trade Apple, but as a market moving stock could you just trade the index ahead of the announcement and be free-and-clear of any impropriety? A harmless quicky… I have no idea, but it’s a perfectly simple question. That question lead me to another market moving curiosity.

Did you see that ES flash crash after the fake AP tweet? I’m surprised it’s not bigger news. 260,000 ES contracts traded, $20 billion notational changed hands, and lots of traders got screwed as their stop losses got triggered. And that’s just the S&P futures market! Bonds, European Futures, Forex, VIX, Oil, everybody got hit for 3 minutes. Oh well… In those 3 minutes well over $1 trillion changed hands! Some serious commission…

Obviously most of those trades were algo driven, so maybe the weak link in High Frequency Trading (HFT)  isn’t the speed, or buggy trading programs (Knight…) after all, but the social media resources HFT uses to drive it’s algos. Just sayin, if you’re a bad guy, why try to hack an exchange, a fund, a market moving enterprise, or bank? Hack a Twitter account.

They might just find the culprit by looking at who really, I mean really, profited from that tweet. We just experienced a modern-day bank heist. Hello good guys? Maybe you should be googling B099i3 & C1yd3

Have fun into Apple’s earnings, I personally can’t wait till it’s over.

EUR-USD Chart

Something Is Always Parabolic

Gold's Parabolic Fall

The surprise yesterday was gold. We’re always looking for congruence within the paradigms we’ve learned to believe in. I had heard somewhere gold was a safe haven play. During periods of fear or worry, in theory, we should see gold rise while money moves away from risky assets (like the S&P).

That didn’t happen yesterday.

We’ve been told over and over gold is a safe asset, real money. Those rules are too simplistic and after getting burned a few times we start doubting our basic notions. And the press doesn’t bother with details. If gold is up they’ll say “The Fed” and if gold is down, “Cyprus”. In reality information we never see is what drives these markets. In the case of gold it might be sovereigns buying (or selling), Fed fear, short covering, muppet trading, shenanigans in a dark pool, an Asian holiday, or a sublime combination. Traders scramble for an explanation, they scramble to mount another paradigm, to justify tomorrows trade. I do it, you do it, that’s the game.  The game gets easier though when you accept that you’re basing a decision on incomplete, simplistic, and probably false, information. I can tell you categorically, whatever your model is, it’s wrong. In all cases, even Goldman Sachs, a Central Bank, or a sneaky congressman will eventually find his assumptions, wrong. Continue reading

Hmm ohh, one of those days

There are a few moves which don’t make much sense to me today, but after the run-up we’ve had a -0.5% doesn’t seem that painful.

The first wild swing which jumps out at me, is gold; but its true for silver and commodities in general today. How do I make sense of a 4% drop in gold? Trading was even halted for 10 seconds! One explanation might be that banks holding JGB have capital requirement issues, the recent volatility might be sending sellers to the gold teller. Goldman’s prediction of gold at 1200 didn’t help, but that’s been out there for a few days. Or it might be that Cyprus is coming under pressure to sell gold for it’s bailout, this I doubt is having any impact. $400 million sold into the market slowly couldn’t account for the slide we’ve seen.

Gold and 10 Year Bond Futures

And the 10yr bond futures are climbing, what’s up with that? It’s just rising, hanging out on an upswing. Something looks fishy to me. The VIX is effectively flat. So what’s going on here? JPG players are selling gold to buy the US 10 yr and option players don’t see much downside risk in the S&P? What about the weak sentiment numbers and lousy retail sales numbers? There’s a fair amount of risk out there.

Today is one of those, ‘hmm, ohhh’ days. My only expectation is that we’ll touch the 61.8% fib (1542 – 1592) on the S&P by close, but being one of those days… Who could say? Maybe she’ll ride into the close on the 76% which is where she’s at presently.

Bitcoin Crashing

Time For Another Bitcoin Post – Down 40% in the last 2 hours

Bubble, no bubble? The markets are in rally mode and Bitcoin is tanking. I’m sure there’s no link, but still… MtGox is suffering under the weight and the exchange is having growing pains.

Bitcoin Crashing

So what’s a Bitcoiner to do? They just learned a few lessons, regular traders have been learning for decades.

  • What goes up goes down.
  • Weakness in the exchange creates a crisis of confidence.
  • Valuation is hard work.
  • Backstops limit volatility.

Good luck bitcoiner, cupcakes just got cheaper.

 

chimp

Smart People

chimpOne of the wonders of the human condition is creative intelligence and I’m constantly amazed by the ability to build perspective with simple ideas, thereby creating something inspiring or enlightening. Grant Williams is one of those people, whom I don’t know, but I admire. And with all the blogs, trash popular news, and ‘writing’ that we consume on the internet, finding smart people, that write, is surprisingly rare.

Yesterday’s TTMYGH must rank among his best. April 4th? Who’d a thought. I won’t deconstruct the little pathway he takes his readers along, but the framing of his idea was poignant. You shouldn’t miss this weeks issue (A Date Which Will Live in Yenfamy). As you know I’ve been debating this BOJ QE question. Who isn’t? I’m looking for context and perspective, what will the BOJ’s action have in the medium-long term? Grant helps a bit.

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Nikkei Chart

How To Spin BOJ Action?

Nikkei ChartBold, unprecedented stimulus and the Nikkei reacted, really reacted. 6% isn’t a number you see often on index moves. I started looking around for some reaction and I didn’t find much. The Fed’s Lockhart says he’s “unsure how the new policy will affect the US”. Ok. If he’s unsure… I guess I can go home now. Yet one line after on my Dow Jones feed Mr. Lockhart says, “the Japan experience explains the Fed policy stance.” Maybe this isn’t contradictory, but something about these two quotes, rings false. The Fed’s been using Japan’s decade of deflation as an argument for QE x3. And now the BOJ is using QE to fight deflation and the Fed says they’re unsure? Strange bag of worms, I’d say.

What about the other indicators?

Gold is going nowhere, no change. The USD JPY pair is up 3%, that would seem normal. Adding to the confusion Mr. Draghi, brought down the European indexes, by saying very little. And for the US markets, after a nice little pull-back yesterday, they’re flat.

Yet, yet…

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