WASHINGTON, June 20, 2013 — On the trading floor, anything can happen. Another nasty market moment blasted Wall Street like a financial thunderclap yesterday afternoon. After roughly two and one-half days of light but lofty trading action, eager bears interpreted the Fed Chair’s comments Wednesday afternoon as an indication that the Fed’s threatened “tapering” activities had likely started this past January. Bang! The market promptly collapsed like a surprise Florida sinkhole.
Okay, we’re exaggerating. But, in the twinkling of an eye, markets plunged a good 200 Dow points after HFTs and other itchy trader fingers had taken about ten minutes to scrutinize The Oracle’s comments.
As we write this, we’re a few minutes from Thursday’s opening bell, and futures indicate a follow-through downdraft will commence shortly, perhaps as bad or worse than yesterday’s flash-flood style waterfall decline.
But what will follow is hard to say, as big market opens, whether up or down, often get blunted or reversed later in the day. Add to this tendency the facts that A. volume generally remains light, relatively speaking, even on big down days; and B. we’re at the end of a particularly volatile options expiration week; and you have what the old “Mickey Mouse Club” TV show used to call “Anything Can Happen Day.” That was the one day in the week when, we figure in hindsight, the producers of the Disney kids’ show punted and went with whatever personality or theme they could come up with.
The same holds true with this market (which has just opened down 103 Dow points, BTW). It’s “Anything Can Happen Day” on Wall Street for sure, meaning the day and the week will either end up way down, or not.
In other words, it’s probably another day for us to keep our powder dry again, while duly noting the following. First of all, gold has absolutely collapsed this morning, down roughly $80 a troy ounce as the market opens.
These swings in the precious metal are getting a little absurd, and are likely the result of massive manipulation and/or options expirations getting the better of ETF traders in gold and other metals. We have a tiny position remaining in PHYS, the physical gold ETF (the only one that holds its own bullion). We may be foolhardy enough to double this position and trade it on a bounce, assuming we get one.
There is absolutely something nefarious afoot in the gold pits, but we still can’t confirm what it is. It looks like pure greed, idiocy, or both to us, but no one is interested in letting the layman take a peek inside the tent.
Oil is also taking a nasty hit this morning. The move is counterintuitive in a way, as the Feds have just reported a lousy jobless claims number this morning, indicating that “tapering” is likely to happen later rather than sooner—which is what The Bernank actually said—but when HFTs and other gnomes get one narrative into their collectively empty heads, it’s hard to stop the ever-gathering momentum of their trading freight train.
In other words, aside from nervous adjustments, it’s best to stand back once again from this volatile market. Unless you’re an options daredevil, of course. In such markets, options premiums rise along with the volatility, making such risky trades potentially rewarding if you’re on the right side.
But these days, we’ve been avoiding options, too. We just can’t get away from that nauseating feeling that small traders are being seriously frisked once again by both the fat cats and the politicians they own and control.
Do something else today. And don’t look down.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
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