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Markets Whiplashed by HFT: Dave's Daily



The ubiquitous 2:15 PM Buy Program Express was launched on time by HFTs. This started a rally like the wave a crowd would start at a football stadium. It ebbed for a time. But, in the last 20 minutes of trading an HFT short-squeeze from hell occurred. The change in conditions was so abrupt headline writers couldn't keep up.

The stimulant was news that Italy is rumored to be on bended knee to China asking for money. China would have to average down to protect whatever investments it already has in the euro zone. The algos must have this kind of stuff programmed in their HAL 9000s. Greece is all but certain to default and China may not care if they do other than the resulting contagion. Then there's the possible downgrade by Moody's of French banks but that didn't bother the algos late in the day.

The euro zone itself is in shambles politically prompting Luxembourg's Jean-Claude Junker to say: "We all know what to do; we just don't know how to get reelected after we've done it."  That about sums it up doesn't it?

It's ironic to see Obama push a jobs bill today while Bank of America (BAC) was shedding 30K jobs and perhaps more. In the meantime, BAC's strategist Mary Ann Bartels doesn't see anything bullish suggesting a 50% chance the S&P could drop 21%. Maybe she's depressed given her work environment.

Gold fell sharply Monday continuing its recent slide; the dollar, higher early, fell with hopes from a China rescue in the euro zone; bonds, also higher early, fell with the late day stock market rally; and, commodities overall were mixed.

Volume remained elevated but breadth per the WSJ was mixed overall.

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