Slow Motion Wreck Hits Exchanges - Again

Another day, another slow motion automated train wreck-type move in equity futures trade. The European futures trade was held in a 0.5% range for 15 hours on Thursday, and then, on cue, just as the closing bell rang across Euro-land the high-frequency trading algorithms kicked in and wrecked the best laid plans of buy-and-holders, and decimated the near-term Dax, FTSE, and CAC charts.

S/P futures responded, and handily smashed three 30-minute candles containing 1.5% of the S/P value into the lap of anybody looking to be in a trade for anything more than half a session. Cash markets are not to be trusted, especially with the Mad Hatter and Tweedle Dee and Tweedle Dumb running the show.

Forex Movers: Thursday trade is all about melt-ups and melt-downs with Cad, Aussie, and Cable close to their opening prices after a huge swing back and forth overnight, in-line with global equity futures going on a roller coaster ride.

Forex Shakers: Eur, Jpy, and Chf have all held their moves against the Usd, as global markets go into another melt-down.

The current market conditions require a trade plan, a sound constitution, solid money management, a realistic view of what should be banked and when, and the understanding that trades may need to be taken on multiple occasions before one will hold. The markets are tradable, they just need agility, and an understanding of the fact that computer coding maybe went just a few X's and O's too far in regard to contingency hedges that seem to have been designed to cream those who are idly monitoring last quarter's 401K statement.

The computer coders replaced the trade desk specialist, and in doing so removed a path of liquidity that would balance the needs of all participants. No specialist on the desk means that computer algorithms are sent out to look for liquidity instead, and when they cannot find it the low-volume melt-ups and melt-downs appear.

Low Liquidity

Inter-bank lending is not happening in any great degree, and is expensive to insure, which leads to a lack of leverage and a heightened distrust of holding anything past the closing bell. That scenario is than leading to the need to balance books at the close of every regional session, three times a day. After all, not many would trust a hefty open position to a computer algorithm if at any time between market close and market open the liquidity dries up.