Thursday, June 25, 2009

Complete Total Jam Job

I don't get upset at the market very often, it is what it is, but personally (not in my fund) I was trading a few futures contracts that had me a little more vocal at my computer screens than usual.

This is totally absurd. We have 1.35 million futures contracts that have traded. Yesterday this time I think was about 500k. Compare that to the cash market where you have 420 million shares traded. This time yesterday was over 500 million. So the cash market is dead, deader than a doornail. the futures market is going beserk getting jammed ruthlessly higher.

Today we had a horrific jobless number. Remember this was one of the first green shoots supposedly telling us that "all was well." Not only did we not break the 600k number to the downside, last weeks number was revised up and this weeks number was back to mid May levels at over 620k. Now in the whacky world of markets the fact that it was bad could be construed as good for the markets. It is the only thought that I could come up with that even comes close to explaining rationally what is going on in the markets today. (a futile exercises I know) The thinking goes like this. The Fed statement was bearish yesterday because it showed the Fed was content doing nothing and talked about inflation which means the magic elixir of liquidity juice may be coming to a halt. The fact that you have bad jobs number means that wouldn't be the case. The Fed will hold longer to keep money sloshing in the system. The problem was the number seemed so bad that it should trump such logic.

On top of that, you have Bernanke getting positioned to get pushed out by Congress, if not now in January, to open a spot for Summers. That can't be good for the markets.

Regardless jam jam jam job up up and away. We broke the trendline. I got out of my futures contract at a nice loss. Thank-you invisible hand, whoever is deciding to continually jam this market higher.


Clayton said...

Yeah, similar to how Aggies were wishy-washy on Elsa Murano and now they're lamenting her exit... we will all be missing Helicopter Ben when Larry Summers is the new master of the universe.

Market Seer said...

Oh I don't think so. Larry Summers may dump the helicopter but he may prove he has plans for a 747 instead. They are all bred from the same gene. Short pleasure in exchange for long term pain.

Clayton said...

Yeah, that's what I was meaning. I thought Summers as Fed head might be the suspicious end game all along, with Summers being named an "economic advisor" in the Administration but not the Treasury Secretary.

Oh well... Everything will be okay for us po' common people as long as those alchemist economists keep turning lead into gold. I guess when Summers is in, Geihtner will have to come up with a more reassuring stump than "the Fed chairman is independent so there's no need to worry about monetization."

There that was some thorough embarrassing-bitter-old-man for ya. Now, you don't have to feel bad about your frustration b/c you're not the only one.

Mark Wolfinger said...

It certainly does fell as if the market is being manipulated, but if so, can the mystery futures buyer (US Government?) simply refuse to sell before settlement?

Market Seer said...

Well if it is government (I am not making those claims about today though to think they never do I think is naive) they can roll it almost indefinitely if they wanted to. If I had 1 billion dollars and I owned 10 ES contracts, I could roll those 10 forever and it wouldn't matter what the market did. Such a small portion of my overall net worth. You have the government with a blank check and it is like holding 10 ES contracts against a billion dollars. I realize in reality that is not the case.

The June contract just recently rolled off. The June contract and the September contract the final few days had 1.5 million contracts being traded as rolling was occurring.

Another issue is if you can jam the market higher past key levels (910 today) then computer quants and traders start jumping in. Easy to sell some of what you bought back. You need a bottomless checkbook to risk that however.

Now, if it is not the government your right. We are approaching the end of the month and the end of the quarter which is the end of the fiscal year for some. So it is possible the jam job is nothing more than big funds trying to square or even have a final push in the last few trading days to help out their positions. That of course would be reversed which you could see in early July.

Take CALPERS, the California pension fund. When they want exposure, they often times will jump on futures contracts first.

I don't know. I could come up with all sorts of possible explinations. I am not saying the invisible hand is the government today or any day. I just know the market is getting jammed higher today and it could be the government, it could be big funds wanting the end of the quarter to be nice, it could be allocation decisions by big funds.