Wednesday, May 20, 2009

Weirder and Weirder

The market is getting more weird by the day. Today was definitely one of those days. Big bounce at the open, once again on no news, then a big top and selloff the rest of the day. Over a 150 point swing.

That in itself is not weird. What was weird was stuff intertwined in the market. For one volume was much higher than the last couple of days (1.65 billion on the NYSE) but still not that high. What exploded was futures volume. Heavy heavy S%P 500 futures trading in the pits today. Now I have talked about futures manipulation and the high volume tied to the futures. This was different. In the manipulation (I should clarify possible manipulation) you had low volume across the board and then huge short term surge in volume hitting the ask pushing the futures up. Today's volume was heavy all day long. Yesterday we traded something like 1.8 to 1.9 million contracts. Today it was over 2.6 to 2.7. Normal in the last month it has been around 2.1. All day long, massive amount of futures were traded. This then seemed to correspond to the SPY (S&P 500 etf). The IWM (Russell 2000 etf) volume was very light most of the day but the SPY volume was much heavier than the last couple of days.

What does this all mean? I really have no idea. My gut tells me that whoever has been pushing up the market either honestly or manipulatively decided to reverse course today. From a manipulative standpoint it makes sense. They jammed the stock prices higher, got the equity capital raises (last big one completed yesterday with Bank of America) and now they will try to unwind the market. You do that by creating a pump and dump which was the big rally early on and then constant selling of your futures position.

This is all speculative, I don't really know, I just know when things don't add up on my screens that I look at all day. I have been able to recognize when something happens in the futures to drive the market higher over the past few months. At some point that has to be reversed, today made me sit back and scratch my head and wonder, maybe it began today.

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