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Tuesday, September 1, 2009

The High Frequency Traders hit the bids


I didn't think they had it in them!

Friday, last weekend, Monday and today, all of Wall Street was blasting this market. Everyone was touting it down, and the boys on the street decided to punish the speculators.

On Friday, good news was sold by the high frequency traders, but the market managed to rally back. Monday, it was hit off of the China sell-off, but we had we rallied in the last ten minutes. But today, they sold it hard on the good ISM news. Up 80, down 200. That's selling good news.

The market, normally always tells you want it wants to do. And this is one of the biggest advertising for a sell-off and a change of direction in the market that I have ever seen.

Which makes me question it.

Because who trusts Wall Street? Does anybody really? Does anybody really trust the Government figures? Does anyone really trust Goldman Sachs? Does anybody really trust these HFT's and the liquidity providers? Does anybody really not think, that these folks could try and melt this market again?

And that's why the market gets hit like it does. Nobody trusts it.

So why not make your year?

Because isn't the market now advertising a sell on good news? What happens when Government figures catch up with reality? Who cares about future orders. We know that "cash for clunkers" increased auto sales, and the $8,000 first time home buyer stimulated sales, but isn't this just borrowing from future business now?

And look at China. Did anyone see that China had permission to tell the Investment banks that they could go and f*ck themselves on their derivative contracts on commodities?

A report that Chinese state-owned companies will be allowed to walk away from loss-making commodity derivative trades provoked anger and dismay among investment bankers on Monday as they feared it may set a damaging precedent.

The State-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying in an article published on Saturday.

It's pretty easy to construct a scenario for getting out, and going to cash. Especially, if your portfolio was under water, and now you've had this massive rally. You can shake people out pretty easily. And it looks like Wall Street wants to shake them out!

The stocks that were a proxy for the market on the way up were the insurance stocks. HIG went from 6 to 25. If the market heads south, HIG will also amplify the move down. That's a tell that should be on everyone's screen.

The stock that is a proxy for market speculation was AIG. I bought calls on this number, and then when it turned against me, I straddled the name with puts. If it opens down tomorrow, I'm selling my puts, and then probably sometime tomorrow morning I'll be re-buying calls on this name at a much further strike down, as I think traders will want to take a shot on this name to the upside again.

And if the speculators want to take a shot with AIG, then I think the market can turn up also, because I think this name is a proxy for the health of the bears gunning this market down. If this name regroups, it means that the bears pressed their bets today.

Unless Wall Street is engaging in truth in advertising!

And I don't think that's a bet I want to take!

5 comments :

Anonymous said...

Man, this sell off was very well planned out. We got rumors flying around and everything caved on good data releases. Plus this was the first day of September so you had to know that the shorts will try to play on the fear, haha!!

Anonymous said...

Palmoni, I didn't know you spook so easily!

This pullback was way overdue, and will be the base for the next leg up.

Unless, of course, it's crash city!

But how could that be? The banks operate with impunity now, backstopped by the government. They'll lead the market one way or another.

And only one way makes any sense at all.

Anonymous said...

We revisit March lows by end of October. Did you think a bursting bubble this large would end with a bull market?

Palmoni said...

No I'm not spooked--I was just saying what the thought of the market was!

It was Wall Street false advertising!

Been in the boondocks for a few days--I don't have the information flow!

Palmoni said...

No way in hades are we re-visiting March lows by October!