31 Aug THE ULTIMATE SUMMER DOLDRUMS
It appears every bulge bracket firm is forecasting considerable volatility in the coming weeks. Is this the result of the lack of volatility of the last sixty days, the least volatile times in about 20 years according to some statistics?
The potential causes for this predicted volatility….earnings, monetary policy, politics, etc. In other words, the typical factors that are always present.
I am a firm believer in the phrase “It is not different this time, there are just different people.” However perhaps today is different given the massive proliferation of ETFs and cross correlated algorithmic trading where everyone owns the same few stocks. As commented many times, when selling commences who is left to buy? No one.
Is this basis of the bulge bracket firms’ forecasts? Perhaps.
Monday was the slowest trading day of the year. Yesterday was the second. In other words, there is little conviction to do anything. But I can write the anemic volume is the result of lack of volatility, volatility required for the algorithmic trading firms that trade upon ranges and moving average line? All must remember that according to the NYSE 89% of its volume is the result of these trading firms.
As noted many times, this is not investing but rather a disguised form of potential manipulation that adds no capital to the capital stock of the economy. In my view, such trading does not increase liquidity, a tenant that many elitists/academics champion as positive virtue of this trading strategy.
Will today be yet another quiet day? Averages are poised to register their first monthly decline since February. How will the ADP Private Sector Employment survey influence the sentiment for Friday’s BLS report?
Last night the foreign markets were mixed. London was down 0.14%, Paris up 0.58%, and Frankfurt down 0.08%. China was up 0.35%, Japan up 0.97% and Hang Sang down 0.17%.
The Dow should open little changed ahead of the ADP data. The 10-year is off 3/32 to yield 1.58%.