Monday, February 11, 2013

No Algo Meat Means No Volume

Since roughly 85% of all market activity is handled via computer algorithm-based trading, there's good reason to suspect that market volume, such as today's - fast on the heels of Friday, which was the lowest volume day of the year (until today) - is going to become the norm, especially if much of the market news is either mundane or bad.

That's because the algos heartily chomp on good market news, profit being (in the words of perma-bull Larry Kudlow) the "mother's milk of the economy," and aren't programmed effectively (some surely are) to quantify downside momentum.

Nobody really wants to see stocks go down, so the quants (programmers) are all really in the bull camp when it comes to writing algos that work.

Did any of these Wall Street whiz kids ever think that skimming the market for pennies with their HFT algos was a bad idea? That it might scare people away from the market and that it might result in a market - in a time when media is controlled and highly contrived - with no liquidity that could go bidless?

Somebody should have looked at the downside of HFT and algo-based trading, because we're getting dangerously close to a market in which nobody wants to participate.

Other than today being the lowest volume session of 2013 (don't worry, there's another 10 1/2 months left to get it even lower), there was nothing of particular interest, except that European finance ministers opened a two-day session in which they will concoct new, more efficient methods of kicking the debt can down their particular road to perdition.

Editor's Note: On Sunday, CBS 60 Minutes aired a piece on the trust, cartel, or monopoly otherwise known as the credit reporting agencies - Equifax, TransUnion and Experian.

Anybody who's ever dealt with these firms - and who hasn't - will find the information in this report somewhat on the tame side, though still worth viewing.

The entire credit reporting scheme operated by these three firms, at the behest of the banks, credit card and finance companies, is a violation of every American's fifth amendment right to due process. A class action should be filed through the ACLU and the Justice Department (good luck with that) to shut this system down. It is horribly flawed, turning everybody into a number. Shades of biblical Apocalypse, indeed.

Watch CBS News Videos Online

Dow 13,971.24, -21.73 (0.16%)
NASDAQ 3,192.00, -1.87 (0.06%)
S&P 500 1,517.01, -0.92 (0.06%)
NYSE Composite 8,919.02, -16.22 (0.18%)
NASDAQ Volume 1,551,395,750
NYSE Volume 2,830,052,000
Combined NYSE & NASDAQ Advance - Decline: 2925-3479
Combined NYSE & NASDAQ New highs - New lows: 332-31
WTI crude oil: 97.03, +1.31
Gold: 1,649.10, -17.80
Silver: 30.91, -0.531

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