Market Montage

While hard to jump immediately on the bandwagon with so many stocks suddenly overbought, the rotation similar to what was seen in January 2012 appears to be here.   All the trades working the past few months are being sold off and money is flowing furiously into cyclical areas of the market.  Some of the moves have been breathtaking – it is simply amazing how central bankers own the psychology of this market.   Random example:

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At this point it seems the S&P 500 can just be renamed the Euro.  Looking at the intraday charts yesterday it is remarkable the symmetry of patterns.  That last 20 minute selloff in the markets was essentially a 1:1 parallel to a selloff in the Euro.  There is really no other need for analysis.   …

Last week's high profile trading debacle has put the focus on high speed algo programs once more.  Like all the other times there is a dislocation of such sort, after a few days, all the fuss will die away and business as usual (70% of all trades now computerized) will continue.  There appears to be no end to it as these folks create so much volume, and exchanges make money off that.  Frankly if there was no real push back after the frightening flash crash of 2010, I don't know what will ever cause real reform.  Whatever the case there is a nice write up in Wired Magazine that interested readers may want to go read for more on the subject and what is coming down the pike – both real and theoretical.   …

The bipolar, macro driven market that has dominated most of the past 4 years continues.  Last week was on pace to be the worst in 9 weeks as Thursday came to a close, only to turn 180 degrees Friday morning in yet another big gap up open that left no one an opportunity to get in.  Once 10 AM passed the S&P 500 essentially traded in a 5 point range the rest of the day.  Looking back, a lot of commentators pointed to the jobs report for the move but that is inaccurate.  The indexes were screaming higher premarket as European indexes raced ahead; the key reason being short term Spanish bonds seeing a large drop off in yield.  Market players were initially disappointed in Draghi's lack of action Thursday, by Friday it appears they saw the light – the ECB will move together with the Euro rescue fund (once launched) and purchase sovereign debt in a 1-2 punch: the rescue fund in the primary market and the ECB in the secondary market.  And with that all our problems are solved.  Or at least enough to kick the can for the 78th time.  Of course we will also get QE sooner rather than later which the market believes is somehow an end all, be all. …