It’s the last trading day of the quarter and month. Portfolio managers want to minimize as best they can losses and damage for their clients. The Fed and ECB added $50 billion to their members this morning that greased the trading desks. The markets were short-term oversold after yesterday’s bloodbath.
We’re back approximately to where we were before yesterday’s failed vote, or down 300 points.
Many markets sharply reversed course including gold and bonds.
Another vote will take place, so it seems. Here’s another good anti-bailout article. Further, with finger-pointing as to how we got to this point, this excellent Glass-Steagall Act article is an outstanding but lengthy recapitulation. You can see it was a bipartisan effort.
Volume was average today while breadth was impressive, but not a 90/10 day.
Elsewhere, money remained incredibly tight as the TED spread stayed high with overnight rates spiking to 6.88%! Fed Funds were at 7% to start the session but declined to below the 2% target rate by the close.
But the SEC and FASB have now chimed in, as I expected they would, to clarify their “mark to market” edicts that have caused problems with balance sheets of financial institutions. To wit: “When an active market for a security does not exist, the use of management estimates that incorporate current market participant expectations of future cash flows, and include appropriate risk premiums, is acceptable.” This is huge and the entire release is here.
The government is using all their power to reverse the markets' death spiral.
But the Fed is running out of ink and paper in the printing press. Here are some details, courtesy of Brad Setser, of balance sheet issues.
Economic data was hyped as positive today; however, an inspection didn’t reveal anything to get excited about. House prices dropped a shocking 16% in July, consumer confidence data was slightly higher at 59 versus 58 and ISM data was weak but the headline number beat estimates even though future orders dropped.
Below is GOOG from my live feed on 5 minute charts and I don’t show the same price. Late breaking news had Nasdaq investigating and wiping out some late trades in GOOG as noted here.
There also are tracking errors today with some of the leveraged issues owing to circumstances unknown currently. There may be some counterparty risk issues and that, combined with fast markets, may have made for further tracking problems.
This is where we stop today, sorry to say. There are too many charts with messed-up data points. I’ll have to reconcile these with my other data feed. This is a time-consuming but important process.
Many wonder why we’re carrying such heavy [over 80%] cash balances, but this type of action is the reason, combined with the fact that this is the most manipulated market in history. Sometimes you just have to stay out of the way and pick another spot.
Today’s action is clouded by this intervention and end of quarter propping with markets oversold. Let’s see what tomorrow brings.
Disclosure: Among other issues the ETF Digest maintains long or short positions in: SDS, QID, IEF and GLD.
