Wednesday trading action: Wall Street’s shell game continues

Stocks try to recoup Tuesday losses, but the steady drip, drip, drip of pre-Fed selling continues to erode October’s bull move.

Hieronymus Bosch: The Conjurer, circa 1502. (Detail image via Wikipedia)

WASHINGTON, November 11, 2015 – The Maven, and indeed, many other long-time professional investors, have been bad-mouthing the 2015 trading action in stocks, well, since about mid-January 2015 to be precise.

The aimless churning and periodic but furtive bull moves in all averages have been just enough to suck the unwary—including us at times—back in, only to pull the rug out from under us just when we’ve regained a little confidence. We’re getting more of the same today, Wednesday in light Veterans Day trading action.

Going short from time to time has provided some remedy for the nonsense. Yet at least half the time, by the afternoon of the day you shorted a stock or ETF, those fun-loving, spoof-a-holic HFTs flip the switch and you’re SOL again.

Read also: Minus Apple, Tuesday stock trading turns into a snore fest

In the end, 2015 is turning out to be one vast shell game, wherein outsiders cleverly bid sectors up, suck in the rubes at higher prices, then short the daylights out of them when they least expect it. Or sometimes the other way around. Where’s the pea? Button, button, who’s got the button?

It’s nuts. But if you’re trying to make at least a modest living out of investing, some days—like today—are enough to make you consider going Postal.

What continues to spook investors and HFT video game players alike, however is a dual conundrum:

  • Will the Fed really really raise interest rates in December?
  • And if so, how badly will markets panic?

We suspect that whatever panic occurs, when and if that interest rate increase occurs, may briefly manifest in violence. But in fact, we’ve been seeing most of that “violent” reaction occur in stages for most of 2015. Insiders have been quietly selling their ample tushes off during nearly every rally, which is why volume is always higher on selloffs than it is on rallies.

But at this point in the year, a great deal of the dumping has already been done and there’s little dip-buying going on anymore, because even lower organisms like individual traders can actually learn over time that they’re being gamed, CNBC’s blow-dried, book-talking “experts” (i.e., shills) notwithstanding.

Read also: Another Blue Monday on Wall Street as mixed reports vex stocks

We are apparently waiting this week for the usual Tower of Babel bafflegab of individual, maverick Fed governors (all of them), so the churn continues unabated and volatility increases. Markets are once again oversold short term. But even this doesn’t much seem to matter. Nothing factual does.

While we’re on the subject, here’s an interesting unemployment chart we discovered at a site called Shadowstats, which interpolates additional data onto the Bureau of Labor Statistic’s various and sundry charts:

The annotation in this chart is by yours truly. Here’s how Shadowstats explains it:

“The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.

“The U-3 unemployment rate is the monthly headline number. The U-6 unemployment rate is the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment.”

U.S. unemployment is actually far worse than the Fed or this Administration will admit. (BLS chart with added estimates)
U.S. unemployment is actually far worse than the Fed or this Administration will admit. (BLS chart with added estimates)

We offer you this bit of info as we wonder aloud what in the Sam Hill the Fed is even thinking when it comes to justifying any near-term rate increase. More smoke and mirrors? More sleight-of-hand? No wonder the government ignores this information. The public would rise up and lynch them, and they wouldn’t want that.

While we prefer at least using the more realistic BLS U-6 numbers when gauging current unemployment—the U-3 number politicians show the rubes each month is an out-and-out lie. Shadowstats’ horrendous estimate, given its even broader calculation, is probably closer to reality as countless real American workers already suspect.

The Fed is out of ammo and realizes that its longstanding ZIRP Zero Interest Rate Policy) is firing blanks. The system does need to return to normalcy. But why lie to the public about things like unemployment except to cover for this Administration’s utter failure to restore America’s economic health, leaving this country essentially leaderless for nearly 8 years? Hope and change.

We will keep trying to play little corners of this market, but without much confidence. We’d advise our readers, however, to stay out until at least some of this mess resolves.

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17