Tuesday, September 13, 2016

Someone flipped the crazy switch

Since Friday the markets have been about as stable as a presidential candidate in sweltering 79 degree heat in NYC.  As a reminder, when last we left off, the markets tumbled 2.5% on Friday as a warning to the Fed that they better not raise rates.  Conveniently, three Fed governors spoke on Monday and told everyone to relax, they won't be doing anything crazy like raising rates and markets roared back (up another 1.8% or so).  Well, today the Fed enters their quiet period (thank goodness) and without anyone to talk about how awesome things are while simultaneously maintaining emergency levels of support for the markets stocks have almost given up all of Monday's gains.

We went through a period of unusual calm this summer - close to 40 days without a 1% swing in the markets - and that seems to have come undone overnight.  Those that follow the order flow closer than I do, say that there is a ton of "spoofing" or false orders in the market right now (ie, in Silver between 3:30am and 4:30am someone place 200+ buy orders and canceled that same order 200+ times) and they say that it's like someone "flipped the crazy switch" on the markets.  I'm not sure what to make of it right now but it's worth following.

BTW - As we are debating whether or not the Fed can come to our rescue again - note this chart from Deutsche Bank.  Basically, since the end of QE1 (3/2010) none of the subsequent Central Bank programs have moved the needle to drive growth.


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