Slowly Goes Wall Street (Remember, It's May)

Equity markets were rather dull today, on exceptionally low volume - which is saying a lot, since volume left the building years ago.

Dull, boring, inconsequential, however, is how financial markets are supposed to be, or, that is at least how they used to be before the advent of personal computers, CNBC and individually-managed accounts. Today's go-go markets are driven by extra doses of liquidity, courtesy of the Fed (as much as readers hate reading that over and over and over again, the author hates having to mention it even more), HFTs, flash crashes, breaking news (why doesn't somebody fix it?), surprises, tweets, scandals, ponzi schemes, dotcoms, options, derivatives, swaps, repos and hot money flowing from carry trades into equities and back out again.

One can only wonder how many times the same money is re-invested, re-invented, re-created, re-hypothecated, recycled, rinsed and repeated. It seems sometimes that one need only a brokerage account and a pair of fast hands to tip-type your way into the wondrous world of high finance. If only such were true, we'd all be traders and multi-millionaires just like the guys on the infomercials telling you that NOW is the time to FLIP THAT HOUSE!

Alas, investing is boring and unexciting, and well it should be, though Americans, driven by media, need the big splash, the dazzle of bright lights and the promise of easy money to be enticed. Sadly for the marketeers and their media whores, more Americans play the ponies, gamble at casinos or play the lottery than invest in stocks, bonds or commodities. We've been programmed to be risk-takers and the stock market - try as it might - just seems to many to be a rigged game for rich guys in suits and ties and fancy women in shiny, tight-fitting business suits.

Thus, we have these dull markets, in which the major brokerages make war with each other via the computer algos, following each other into what eventually becomes a black hole, a void, a nonsensical, immaterial, valueless dump. That's what our stock markets have devolved into, especially after the crash of 2008-09. The major indices may have come all the way back in the four-to-five years since then, but all that money has been sucked out of the market by the brokerages and hedge funds via bonuses. It's common knowledge that the average investor usually gets screwed unless he/she is either very careful or very smart. There's just no way to win a rigged game. As the old adage goes, "if you're playing a game of poker and you don't know who the mark is, chances are it's probably you."

The general American public is simply not that stupid. After being burned by the high-tech Wall Street crooks in 2000, 2001 and again in 2008, they have not returned. Some maybe, but they're a small minority, mostly younger folks who don't know better or older people with money to burn, potentially. Paper losses still sting, and, if there's another severe downturn in the markets any time soon - an event long, long overdue, according to fundamentals - they'll be gone for good as well.

With all the scams, crimes and untold misdeeds that have become all-too-common on Wall Street - without, incidentally, any criminal prosecutions - is there any wonder that average people with money are still shy about investing in stocks? In a perverse way, thats why this market must and will likely continue to defy gravity and levitate to higher and higher levels: because another crash would destroy what little bit of confidence is left in the ultimate confidence game.

So, now that the banks are all sufficiently recapitalized (supposedly) and everything in America is just hunky-dorey, Wall Street may be looking itself in the mirror and wondering if they've taken too many scalps over the past few years. Maybe they'll keep the liquidity-driven, non-fundamental, irrational exuberance going for a while longer, but slowly, much more slowly.

Or is it time to turn it over again? Wash, rinse, repeat...

Dow 15,091.68, -26.81 (0.18%)
NASDAQ 3,438.79, +2.21 (0.06%)
S&P 500 1,633.77, +0.07 (0.00%)
NYSE Composite 9,437.17, -5.59 (0.06%)
NASDAQ Volume 1,605,809,375
NYSE Volume 3,124,652,250
Combined NYSE & NASDAQ Advance - Decline: 2673-3792
Combined NYSE & NASDAQ New highs - New lows: 475-30
WTI crude oil: 95.17, -0.87
Gold: 1,434.30, -2.30
Silver: 23.70, +0.038

Flash Crash Proves Individuals are OUT of the Market and Computers Run the Show

As mentioned briefly yesterday, US and European markets are a joke. They are manipulated beyond one's wildest imagination and almost exclusively, the trading is done by computer algorithms, as was made entirely too clear by the action in yesterday's hacked AP Twitter account-flash crash.

In case you missed it - after all, it was only a four minute event - stocks lost all of their gains when somebody hacked into the Twitter account of the Associated Press (AP) and posted that there were two explosions at the white House and that President Barack Obama had been injured.

The tweet was a hoax, but the computers - which cannot deduce and make value judgements - responded by selling off all stocks. Volume, as displayed in animations from nanex.net completely dried up, leaving a few computers trading with a few other computers.

In other words, there were very few, if any, human responses to the fake tweet. Welcome to the bidless US stock markets, where only the computers can get the best prices and humans are relegated to a back seat. Any wonder why individual investors are wary of the stock markets? The same conditions likely exist - though not in such a pronounced manner - in forex and commodity markets.

It's time the American people disengage from this lunacy where only the bankers, exchanges and traders profit.

Take, for instance, today's trading, in which, when all was said and done at the close, the S&P gained a penny, the NASDAQ, 32 cents, while the Dow was down 43 points and the NYSE Composite gained almost 34 points. Surely that makes sense to some master algo inside a supercomputer somewhere beneath the trading floors, but to us dumb humans, it's somewhat confounding and confusing.

CNBC's Rick Santelli astutely pointed out that the other trade impacted by the phony tweet was none other than the Japanese Yen - US Dollar cross and the Yen/Euro cross, making the point that the Yen is now also tied into US stocks by HFT algos. Lovely.

Sooner or later, there's going to be a mistake somewhere, or some purposeful key-logging or hacking that completely disrupts trading in markets nearly around the world, and by then it will be too late. Obviously, having algos that trade on the basis of tweeted information is rife with flaws and ripe for harvest by nefarious forces.

As far as today's trading is concerned, nothing really mattered, even though the US was hit with another poor economic report, this one on durable goods orders for March, which came in at -5.1% on expectations of -3.1, so it was a bad miss on an equally bad forecast.

The spate of bad economic data has been partially offset of late by fairly good earnings reports from a smorgasbord of companies, close to half the S&P 500 having already reported. Of course, the algos are all over those, programmed to buy heavily on any earnings beats and disregard most misses.

Reality seems to have evaded Wall Street on a semi-permanent basis, but, Wall Street has never purported to have been a place for well-grounded types of people in the first place.

With sociopaths running the computers which trade the world, humans are bound to get bruised, and badly.

Gold and silver got a little bit of a bid, but a good chuck of it after the COMEX trading session ended. Oil was the top-performer with a gain of more than two percent. Oil never seems to be able to stay down for long. Funny how that always seems to be the case.

Dow 14,676.30, -43.16 (0.29%)
NASDAQ 3,269.65, +0.32 (0.01%)
S&P 500 1,578.79, +0.01 (0.00%)
NYSE Composite 9,147.77, +32.65 (0.37%)
NASDAQ Volume... 1,643,812,625.00
NYSE Volume 3,647,139,250
Combined NYSE & NASDAQ Advance - Decline: 4021-2343
Combined NYSE & NASDAQ New highs - New lows: 381-36
WTI crude oil: 91.43, +2.25
Gold: 1,423.70, +14.90
Silver: 22.83, +0.016

Are Americans Waking up to Gold?

It's a rare day indeed when Money Daily sources information from CNBC, because the on-air talent are generally stock-pumping cheerleaders for equities, but today's information presented by Steve Liesman, who offered up the results of CNBC's All-American Economic Survey in various spots on the network throughout the day, had heads spinning and eyes and ears popping when he revealed that of the 836 respondents in the survey, 37% found gold to be their preferred investment, followed by real estate at 24% and stocks a distant third, at 19%.

What this says about the stock market and American attitudes towards it partially explains the low volumes that have been a dominant feature for many months, implying (and there are numerous studies to back this up) that individual investors have nearly completely soured on stocks as stable investments due to a variety of factors, including, but surely not limited to, the financial collapse of 2008-09, the flash crash of May 6, 2010, a general distrust of Wall Street and the Federal Reserve and various other market events, such as the recent IPO failure of BATS.

What did not come out of the CNBC segment below, led off by Liesman's comment that he was "floored" by this finding, is that gold (and silver and platinum) are not only tradable investment vehicles that can be instantly redeemed for cash or bartered for other goods and services, but that the precious metals are tangible assets that not only appreciate, especially in light of dollar debasement, but are a store of value and wealth at a time in which there's an oversupply of skepticism pertaining to the management of currencies worldwide and yields on "safe" investments, such as money market funds or Treasuries are returning less than the rate of inflation.

(Note on this video: the first 6:15 covers the gold story; the remainder is on other topics.)



These stunning survey results are indicative of Americans' growing displeasure of a system which they rightly assume is unfairly slanted in favor of Wall Street fat cats and DC politicians, who engage in insider trading and other market-rigging activities with nearly universal disdain for the average American and small investor. It also destroys the notion that Americans are stupid when it comes to investing, as the "muppets," as some Goldman Sachs executives refer to their clients, appear to be more concerned about lasting value rather than quick, day-trading profits.

It was truly a pleasure to watch and listen to the various and mostly wrong CNBC commentators as they scrambled for explanations to somehow blunt the contrarian thrust of the message. Americans are not stupid and they don't like being cheated; there are two good reasons right there why more and more Americans are keeping a safe distance from stocks and Wall Street and putting their investment dollars into tangible assets, like gold.

As for the markets, todays was definitely a "risk off" event, with stocks and commodities both feeling the heat. Of course, in a yo-yo economy such as we have, one day does not make anything even closely resembling a trend, though the losses today and on Tuesday took a lot of the punch out of Monday's rally.

With just two more trading days left in the month and the first quarter, some shaving of profits should be expected prior to what are traditionally strong market up-moving days: the end of quarter "window dressing" by te fund managers expected on Friday and the first trading day of the new quarter, come Monday, April 2nd.

Dow 13,126.21, -71.52 (0.54%)
NASDAQ 3,104.96, -15.39 (0.49%)
S&P 500 1,405.54, -6.98 (0.49%)
NYSE Composite 8,188.34, -51.03 (0.62%)
NASDAQ Volume 1,764,716,250
NYSE Volume 3,854,093,750
Combined NYSE & NASDAQ Advance - Decline: 2033-3584
Combined NYSE & NASDAQ New highs - New lows: 144-46
WTI crude oil: 105.41, -1.92
Gold: 1,657.90, -27.00
Silver: 31.83, -0.78

Stocks Higher Six of Seven Days in September

Even though stocks seem to have shaken off the summer blahs, two issues continue to dog the market for equities.

First, the major averages are still stuck below their 200-day moving averages. Just today, the Dow reached that level, and a breakout above 10,500 could drag the other indices along with it. That's for next week, however, when a number of key economic reports are due out, including Capacity Utilization, Industrial Production, CPI, PPI, Retail Sales and the Michigan Consumer Sentiment gauge for September.

Seeing as how these data sets have been playing an increasingly larger role in the direction of stocks, next week's movement should be tied directly to those various readings.

The second - and probably more worrisome - facet of the current range-bound movement is the continuing saga of slack volume. Like seemingly everything else in the US economy, there's an overabundance of equities but a serious lack of demand. We have commented on the low volume data ad nauseam, but the issue keeps dogging the market like a bad rash.

Until there's some semblance of confidence in stocks from individual investors, no rally will be trusted, no quoted price believed.

On the topics of trust and confidence, the SEC investigation of the May "flash crash" surely isn't instilling any of either into the hearts and minds of investors. In typical bureaucratic fashion, the SEC has performed an admirable job of foot-dragging, jaw-boning and bush-beating around the actual causes of the sudden drop which sent the Dow plummeting more than 700 points and quickly recovering, all in the span of 20 minutes.

The agency has ruled out some causes, including quote stuffing (the process of flooding an exchange with orders, along the lines of an internet "denial of service" attack), which actually seem to be at the heart of what happened. The agency expects to issue a final report - which will, no doubt, come to no conclusion - by the end of September, a full four months after an event which took less than half an hour from start to finish.

Regardless, the flash crash and overwhelming suspicion that the market is rigged by insiders has kept investors away for months. Average daily volume is off by more than 30% from previous "normal" levels.

Still, investors seemed content to push prices a little higher each day this week after Monday's selloff, the net result having the indices closing marginally higher than last week's finish.

Dow 10,462.77, +47.53 (0.46%)
NASDAQ 2,242.48, +6.28 (0.28%)
S&P 500 1,109.55, +5.37 (0.49%)
NYSE Composite 7,067.51, +33.14 (0.47%)

For the third straight session, winners topped losers, though again by a diminishing margin, 3405-2232. New highs: 297; New lows: 55. Volume: Pathetic.

NASDAQ Volume 1,630,413,750
NYSE Volume 3,165,025,000

Oil got a significant boost on news of a Canadian pipeline leak, gaining $2.20, to $76.45. The metals continued to stall out, with gold losing $4.40, to $1,244.50, and silver off a penny, at $19.80

24 Seconds to Financial Incineration

Another Monday of not trading (for many) has come and gone, and with it the hopes for a US economic recovery any time soon. Even though the words - like upturn, rebound, recovery - are spoken on CNBC, evidence of them is falling in frequency as the evaporation of trading continues to take hold.

There's a real problem with the US markets and it has as much to do with technology and greed as it does with fear, uncertainty and skepticism, all of which have been on the rise not just in the past few weeks or months, but for years.

The average American (if there is anything such as "average") is invested, like it or not, in stocks to varying degrees. Some have their own online accounts, some are in mutual funds, others in 401k funds, others have their money forcibly taken from them by union fiat and pushed into a pension fund. Anyone who pays taxes is invested via society because the money they pay in taxes is inextricably wound up into public employee pension funds, most of which are glorified Ponzi schemes which need to be radially overhauled. So, for the sake of argument, we all have an interest in the smooth functioning and prosperity of our capital markets.

What amounts to the real problem, at its very core, is a rising lack of confidence that the system is fair and not manipulated. And that's because many have come to the sad realization that it is not, that it favors those with bigger bank accounts, better access and faster computers. Nothing could have put that issue more in focus than the "flash crash" of May 6, 2010, when stocks tumbled more than 600 points on the Dow Jones Industrial Index in a matter of minutes before recovering most of those losses in mere minutes afterward.

Why the "flash crash" of concern right now carries any number of rationales, but it is probably the one event - still unexplained by government regulators who vowed to "look into" the matter - that has, more than any other single event, exacerbated the flight of small investors away from stocks and stock markets.

Foremost, the regulators looking into the cause of the event are lying through their collective teeth when they say they have not figured out why it occurred. It happened because of a time lag in different trade reporting venues, between the NYSE, the specialists and other exchanges and exploitation of them by hedge fund traders. Which exchanges or traders are not readily known, though the SEC could pin those down if they so desired.

More than likely culprits include high-frequency traders (HFT) whose desks belong to some of the more well-known institutions on Wall Street, which is another reason why the government can't seem to find numerous needles in the stock market haystack. The clues are all there, all recorded, but the regulators simply do not want to expose the truth, their reasons being that even more faith in the markets would be squandered, while, in reality, their resolute desire to "keep the lid on" is only making matters worse as more and more honest investors are too afraid, been burned too many times and now have lost their last remaining sliver of faith in the markets.

An interesting article by Tyler Durden of ZeroHedge.com, published today, adds more credence to the machinations of the conspiracy crowd. Durden cites a report which demonstrates two very salient pieces of data. One is that the NBBO (National Best Bid and Offer) - the best price quoted - is not actually that at all, that it often defaults to the NYSE price. The second piece of information is even more critical: the time lag between the quoted NYSE price and the actual trading price can be as much as 24 seconds or longer in the CQS (Consolidated Quotation System).

This may sound like a lot of mumbo-jumbo to most people, but in a world dominated by enormous companies using vast amounts of money and the world's fastest computers, 24 seconds in which a quote may be off by a quarter point, a half point or more, can result in huge profits, and that's what happened during the aforementioned "flash crash" and continues as an illegal arbitrage tool of the rich and powerful to this day.

Rather than belabor the point by trying to explain it all in layman's terms, attention should be focused on Nanex.net the one company which has done a detailed analysis of the event and continues to provide cogent explanations of what's really going on behind the scenes in our swift and untidy, unbalanced, unfair markets.

The question arises that if Nanex could figure this out, why hasn't the SEC? And why hasn't this been headline news on the financial and news networks? Being that I am prone to believing the worst about corporations and our government, I urge readers to examine the facts and draw their own conclusions. I believe the work by Nanex is top-rate and unbiased, and I'll leave it at that.

All of this matters so much today because the markets are rather rapidly grinding to a halt. We've been detailing the low volume regime that's persisted for the past two weeks, and today it got even worse. Not only that, but the trading pattern of the major indices are indicating massive manipulation and arrogance by insiders and patterns suggestive of an imminent crash.

I've borrowed the chart of today's Dow for emphasis.

Note that stocks were up initially, and then fell abruptly, vacillated through most of the day and then slid lower into the close. The other indices followed roughly the same pattern all day. This is a classic bear market trading session, a sucker's market, if you will, in which stocks fly at the open suckering in the slower traders, pounded lower throughout the day, and then hammered down again into the close. As usual, some people made money off this trade, others lost. You can only guess who were the winners (HTFs, Goldman Sachs, JP Morgan, et. al.) and who were the losers (individual investors, some small hedge funds, pension and mutual funds).

This is a no-win situation for everybody as pointed out by Kristina Peterson in "Not Wolf, Not Bear, Meet the Wolf Market," published in the Wall Street Journal, which describes the current condition of the market as analogous to a pack of wolves, which, after devouring all of the prey then turn on each other. Ergo, low volume of trading, because, in the wolf market, there aren't many other animals on which to gnaw.

So, thanks for indulging me, and allowing me to explain how 24 seconds can turn into the equivalent of an eternity in financial hell.

Dow 10,174.41, -39.21 (0.38%)
NASDAQ 2,159.63, -20.13 (0.92%)
S&P 500 1,067.36, -4.33 (0.40%)
NYSE Composite 6,784.97, -28.18 (0.41%)

On the day, decliners took advantage over advancing issues, 3902-1826, though new highs exceeded new lows, 263-216.

NASDAQ Volume 1,722,462,250
NYSE Volume 3,477,778,250

Commodities continued to trend lower, especially in the energy space, where crude oil for September delivery slipped another 72 cents, to $73.10. The metals were little changed. Gold fell 40 cents, to $1,226.90, and silver was unchanged at $17.98.

Things are grinding to a halt almost everywhere, but we'll find out just how quickly with some economic data this week. Existing home sales figures for July will be released tomorrow, new home sales and durable goods on Wednesday, initial claims on Thursday and finally, the government's second estimate on GDP for the second quarter on Friday, along with the University of Michigan's Consumer Sentiment Index. It ought to be a fascinating, though slow-trading volume week.