I’m a little late here, but I thought this was interesting. You may remember on the first of August volume went thru the roof. It turns out that the cause was Knight Trading and their errant software. Here’s an article from Bloomberg on their problems:
“Knight Capital Group Inc. (KCG)’s $440 million trading loss stemmed
from old computer software that was inadvertently reactivated when a new
program was installed, according to two people briefed on the matter.” Full
story at…
http://www.bloomberg.com/news/2012-08-14/knight-software.html
Now some are suggesting
that the current low volume is related to Knight’s problems and it may be. They stopped trading while trying to track
down the problems. It really is an
indication of the pervasiveness of computer trading and how it is distorting
the markets. Here’s more on the subject
from ZeroHedge.
ZEROHEDGE POST 13 Aug 2012
"NYSE
volume plunged - almost unbelievably to be frank - to its lowest
non-holiday-trading day volume in over a decade. Intraday ranges remain tiny and average trade size
unremarkable as ES is still suffering from the post-Knight slashing in volume…
Stunningly - today's NYSE
volume was 3 standard-deviations below its 9 year trend lower on an EXPONENTIAL
chart!!! - this is easily the lowest NYSE volume day of trading that is not a
holiday!!...Just to be clear - and with
no hyperbole - NYSE volume has trended exponentially lower for over 8 years and
today's volume was still a 3-Sigma (3-std deviation) outlier to the downside!!"
I don’t know if that low
volume is good or bad for the market. I
would like to see computer trading halted, especially the high frequency
trading. It is too easy for them to
manipulate the markets.
MARKET
Wednesday the S&P 500
finished up 2pts (0.1%) to 1406 (when rounded).
VIX fell 1.5% to 14.63. The
S&P 500 seems to be stalling here. Could
this be the top? My crystal ball is a
bit foggy so I’ll wait for the NTSM system to give some clues. At this point, it looks positive, but that
can change in a hurry.
The Morgan Stanley
Cyclical index is rising faster than the S&P 500 recently and that experimental
indicator flashed BUY today. There is no
action to take on that news, but there is an important point here. If investors
as a whole believed that we are headed for a recession soon they would not be
buying cyclical stocks faster than the top 500 stocks. Either the investing community is clueless,
or those calling for a recession are wrong.
Either is possible.
NTSM
The
NTSM analysis switched back to BUY at the close on Wednesday because the VIX
indicator moved back into positive territory.
MY INVESTED POSITION
Based on the BUY signal, 6
July, I moved back into the market on 9 July (after the weekend) at S&P 500
1352. I now have a 50% stock allocation
overall. For my age, that is what most
advisors recommend, however, I am normally much more aggressive. I have less invested in stocks now because
there’s a lot of risk.
