Nathan's Economic Edge: Morning Update/ Market Thread 5/28

Nathan's Economic Edge: Morning Update/ Market Thread 5/28: "Morning Update/ Market Thread 5/28
Good Morning,

Equity futures are flat following yesterday's 284 point jaunt. That was a ridiculous 97% up day by volume on the NYSE. Now, normally I would consider that a “panic” buying day, but it came on much lower volume. Remember, volume confirms price, and volume hasn’t confirmed any direction but down for the past 3 years.

And last night it dawned on me what’s occurring is not the same thing as what used to occur in the good old days of 90ish percent up or down days… Of course you know that the market is extremely volatile, but we’ve had SIX 90%+ down days in the past few weeks to go along with another couple 90%+ up days (no follow-through on the upside, only on the downside). These have not just been 90%, they’ve been in the high 90’s. Now combine that fact with the fact that four banks had perfect trading quarters… the conclusion is that HFT (High Frequency Trading) has become so good and so fast at chasing short term momentum that all the machines get on the same side of the trade way faster and more efficiently than they used to. I mean, come on – 97% of all the trading volume was long yesterday, that’s simply absurd. Was mom and pop going long because we finally broke back above 1,090? Hardly, these lopsided days are yet another sign of how HFT and a very few players have taken over the markets. I reiterate; the markets no longer exist, they are a computer simulation.

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