What words can I use to describe Friday? Cathartic? Decimation? Ugly? Frightening? Capitulation?
I will continue to argue ALL markets have been completely co-opted by high frequency trading.
I found it noteworthy that late Friday afternoon, US beef producers want the CME Group to curb high frequency trading of livestock contracts after “surging volatility” has made them more of a “liability than a benefit.”
The beef association hosted a meeting where traders, economists and hedgers “delivered evidence and fist hand accounts” to support taking action.
Many times I have quoted a SEC commissioner stating that HFT have created an “unleveled playing field,” an imbalance further amplified by the “untested regulations of Dodd Frank.”
What will it take to institute curbs? Something more than a flash crash or a longer term spike in yields that bankrupts a HFT firm causing a liquidity crisis for one of the 21 primary dealers?
Outlandish thought? Absolutely not. Drexel Burnham. LTCM. Enron. Lehman. AIG. MF Global, etc.
Many have been slaughtered since January 1 with many names down 25%-35% for no apparent reason. There is massive selling and no buyers. In some instances the total number of shares traded amount to 10% to 15% outstanding with no one holder owning more than 3%. Is this bona fide selling or outright manipulation?
What will happen this week? The economic calendar is filled with housing statistics.
Last night the foreign markets were up. London was up 2.16%, Paris up 2.47% and Frankfurt up 2.12%. China was up 3.22%, Japan up 0.55% and Hang Sang up 2.07%.
The Dow should open significantly higher as perhaps the despondency had gone too far. Commodities and credit markets strengthened as Chinese growth exceeded the most pessimistic forecasts. The 10-year is off 11/32 to yield 2.08%.