Crude Oil on 6/7/13 - Popped up 1% and then another 1%

Today, crude oil was trading lower by about -1%, then bounced to about even -- and is now up almost +1%.  This is all within about 45 minutes -- and happened by about 10:15am EST.

Just an observation about market action and why traders oftentimes need to think about time-frames and how various triggers react to volatility.

Fat Fingers, Phony Tweets and Today's Markets

A few years back, we had the "Flash Crash" due to the "fat finger..."  This past week -- on Tuesday -- if you looked at the price chart for the day, and didn't know what was going on, you might think that there was a data error (see circled area).  However, what you see is the real price action -- moving markets down 1% and then up 1%, within minutes -- due to false rumors of an explosion near the White House.

The DJIA dropped 120 points in just one minute due to the fake tweet!  Tory Capital reports below:

For a few surreal minutes, a mere 12 words on Twitter caused the world's mightiest stock market to tremble.

No sooner did hackers send a false Associated Press tweet reporting explosions at the White House on Tuesday than investors started dumping stocks eventually unloading $134 billion worth. Turns out, some investors are not only gullible, they're impossibly fast stock traders.

Except most of the investors weren't human. They were computers, selling on autopilot beyond the control of humans, like a scene from a sci-fi horror film.

"Before you could blink, it was over," said Joe Saluzzi, co-founder of Themis Trading and an outspoken critic of high-speed computerized trading. "With people, you wouldn't have this type of reaction."

For decades, computers have been sorting through data and news to help investment funds decide whether to buy or sell. But that's old school. Now "algorithmic" trading programs sift through data, news, even tweets, and execute trades by themselves in fractions of a second, without slowpoke humans getting in the way. More than half of stock trading every day is done this way.

Read more here:
http://www.ino.com/blog/2013/04/how-a-phony-tweet-and-computer-trades-sank-stocks/

On the Budget, Default and Potential Downgrade

We normally focus on the technical moves within the financial markets, but enjoyed this article on the Washington "happenings."

Washington (CNN) -- With America now perilously close to default, here's where I sense we stand. My observations may be off as I have only had a brief time in Washington to take measure, but let me give it my best shot.

First off, the good news: The next several days are likely to be tortuous, but odds are shifting now in favor of a resolution that will prevent default. Behind the scenes, congressional leaders on both sides are talking to each other about ways out of this mess -- talks that are quiet, frequent and urgent.

Importantly, the two key plans now on the table -- one from House Speaker John Boehner, the other from Senate Majority Leader Harry Reid -- bear important similarities. Both are based squarely on spending cuts, and the Democrats aren't now pushing for tax increases. That makes it easier to find common ground.

Finally, there are hints that if a bipartisan deal is shaping up, President Barack Obama may be willing to accept an extension of the debt ceiling for a couple of weeks, give or take a bit. Default is still a serious threat, but there may be enough will and enough time to hammer out a compromise that both sides can swallow.

Read more here:

http://www.cnn.com/2011/OPINION/07/26/gergen.debt.solution/index.html?hpt=hp_t1

Recap of May Financial Markets 6/2/11

May was volatile for many asset classes – and the futures & commodities markets were no exception. Some notes on May’s market action:

· Crude Oil: after hitting recent highs to end April ($115/barrel on the July contract), crude oil declined the first 5 days of May (including -9% in a single day) – as it lost -20% (to $95), before consolidating at $100/barrel.

· Gold: similar to crude, Gold hit highs at the end of April near 1580, then collapsed all the way to 1480 – before settling the month at 1540.

· Equity Markets: global stock markets were down in May, with the S&P ending down -1.1% (rallying from a low of -3.5% at mid-month). European markets underperformed due to debt worries.

· Currencies: the US dollar has shown strength as the markets try to sort out economic growth, debt problems, and other key forex drivers.

· Bonds: the fixed income market was one of the better markets for trading programs during May, as the “flight to safety” caused bonds to rise.

March Recap 4/5/11

As usual, the financial markets were very interesting.  The month of March saw extreme volatility -- and weirdly enough, some markets remained relatively flat for the month.  U.S. stocks and bonds ended the month mostly flat, with the S&P 500 closing at 1326 after opening the month at 1327.

Events in Japan and Libya created extreme volatility and whipsaw-like market action for many markets.  The Japanese Nikkei index plummeted -20% before bouncing back to end the month down about -10%.  Many other markets such as sugar, oil, and grains also saw reversals in long-term trends and then a bounce-back.

Managed futures indices and benchmarks tabulated by Barclays and NewEdge were down about -2% to -5%.  Trading advisor performance was generally down, with performance in a wide range.  In general, the commodities sectors fared better than the financial sectors.

Long-Term Stock Models Go Long 10/7/10 350pm

Near the close today, our long-term stock market model has gone fully long, from it's medium-long position.

In addition, our intermediate-term models are just very slightly short, from a moderately short position. Net-net, we now have a moderate to medium-long stock market position and outlook. You can't fight the tape...

Stock Market Oversold 8/12/10

At current levels, our intermediate-term overbought/oversold stock market indicators feel that some of the air has been let out of the market -- and are going long. We have a full long-signal based on these intermediate-term models.

Note that due to the sharp sell-off from recent peaks, our long-term model is just very slightly bullish, down from its medium long signal.

Net-net, we will have a bullish stock market stance, with the market's short-term trend helping us with our overall equity exposure.

8/12/10 3:25pm ET

Stock Indicators, A Look at Futures

A quick update on our stock market indicators:

• Our overbought indicators are still flashing the warning signs we mentioned last week.
• Our long-term and short-term indicators remain bullish/long.

Overall, we have remained slightly long as the market has continued its rally -- albeit with relatively modest position sizes. Some other market sectors have been helping our portfolio recently -- namely some futures markets.

Gold has been in a sustained trend higher, rising from the mid 900-range (just a few weeks ago), breaking through the 1000 milestone mark -- and is now reaching contract highs around 1020. Gold is poised to spike through to new highs, or may consolidate before continuing its run.

In other futures markets:

• Sugar is reaching multi-year highs.
• ECU & Yen strong vs. US dollar.
• Bonds continue to move higher.
• Crude oil is volatile as usual, but is trending higher.
• Grains and meats are generally lower.
• And as we mentioned, gold is very bullish. Other precious metals and copper are also moving higher.

Early Morning Calls: Stocks Up, Gold Up, US $ down

Many market sectors are continuing their extended moves, with US stocks calling higher early Tuesday morning due to the G-20 stimulus pledge. On Labor Day Monday, most world stocks were up 1%-1.5%. Our stock indicators remain long http://z-trader.blogspot.com/2009/09/stocks-all-systems-go.html .

This is causing gold to extend its push higher -- and is newsworthy, with gold currently trading hands at more than $1000/oz ($1007 in early morning trade, in the Dec futures contract). Gold has the potential to be a major mover today, as stops above $1000 are taken out. On the other hand, some traders will take profits at the round $1000 level. The US dollar is lower.

At some point, the fundamentals say that we may have to "pay the piper" -- but for now, traders need to be neutral or following these trends. Some traders may even be "dipping their toes in" and taking small contrarian positions -- but we typically follow extended moves. The global economy has hopefully averted more drastic moves in the financial markets, but only time will tell.

Quick follow-ups:

• After running to multi-year highs, the Sugar market is taking a breather and is down significantly in just a few days. Traders should look for a base before accumulating long positions again. http://z-trader.blogspot.com/2009/08/sugar-market.html
• Soon after our pre-market followup on Rambus last Friday, rumors of Samsung buying RMBS -- or at least in serious talks -- caused the stock to pop back up towards its upper range. We have no information besides the rumors swirling around. However, we believe that (1) the court delay under "weird" circumstances, combined with (2) a "big volume day" (share volume was more than four times the recent average volume; options volume was more than three times normal!) -- means that something could be in the works.
• Rambus is currently trading around $19 in Germany, after closing at 17.75 last Friday and 15.93 on Thursday. http://z-trader.blogspot.com/2009/09/rmbs-update.html