David Moenning's  Instablog

David Moenning
Send Message
David Moenning is a the proprietor of StateoftheMarkets.com. In addition to providing free and subscription-based portfolios on "State", Dave is a full-time money manager and the President and Chief Investment Strategist of a Chicago-based Registered Investment Advisory firm. Dave... More
My company:
StateoftheMarkets.com
My blog:
Daily State of the Markets
  • The State Of The Speculation 0 comments
    Jun 18, 2013 9:01 AM

    Daily State of the Markets
    Tuesday, June 18, 2013

    Good Morning. For the fifth day in a row (and the eleventh out of the last twelve), the DJIA experienced intraday volatility exceeding 100 points yesterday. While volatility in and of itself isn't a big deal these days, we do have to recognize that this represents a change in the market's character over what we had seen in the first five and one-half months of the year. And until we either hear from Mr. Bernanke or the trading range breaks, we can probably expect the manic depressive behavior to continue.

    I was traveling during much of Monday's session and as such, I didn't have access to the minute-by-minute action on the charts. Yet, even via the finance app on my iPhone I was able to pick up the monster dive that took the Dow down 150 points in about half an hour. And as usual, I wanted to know why the move had occurred.

    Obviously, the quick dance to the downside was tied to algo-driven sell programs - that's never in question these days. No, it was the trigger that I was looking for.

    Within just a moment or two, I had identified the culprit. A headline from the Financial Times read: "Fed likely to signal tapering move is close." And just like that, the S&P 500 fell 15 points and the DJIA dropped 150.

    But here's the problem. The article didn't say anything new on the subject. And the article did not quote any Fed officials. No, just the inference that the Fed might be close to tapering the amount of money going into their QE program every month was enough to send the algos into overdrive.

    But upon closer inspection, the article really represented speculation on the part of the author. Sure, Mr. Kaminska cited some correlation between the number of Bloomberg stories with the keywords "tapering" and "volatility." And yes, the author did reprint a portion of an article written by somebody else talking about Jon Hilsenrath's recent article. But other than that, this article, yes, the one that moved the market 150 points in a matter of minutes, contained little to no substance.

    My immediate response was to the move was to wonder aloud if the FT article had trumped the Hilsenrath article from Thursday. It seemed odd to me that the market was keying off of some article from across the pond instead of the position taken by "Hilsy." Did the FT know something that Hilsenrath didn't? Did the FT have a new comment from someone on the inside? In a word, no.

    In fact, the author of the FT article later tweeted several comments that seemed to ease the markets fears. First, Kaminska tweeted that the Fed doesn't leak information to anyone - including him. Then he said that he believes the Fed's tapering will begin in September. And Kaminska tweeted that he doesn't know anything for sure.

    So there you have it. Once again, the alogs picked up on a headline and assumed it was accurate. But in the words of my friend and colleague Curt Bergquist, this was "an article about an article about an article... now that's award winning reporting." In other words, the algo's didn't "read" the article, they just were programmed to react to the headlines. And then once the humans got involved and realized that this was a non-story, the indices rebounded a bit. But not before the computers scared the heck out of anyone watching who wasn't privy to what was happening.

    In sum, this is the state of the speculation regarding what the Fed may or may not do next. The good news is we only have to wait another day and one half for the current ride to end.

    Publishing Note: My apologies... I managed to misread my schedule yesterday. It is tomorrow that I have an early meeting and will not publish morning report. Regular "State" reports will return on Thursday.

    Looking for a disciplined approach to managing stock market risk on a daily basis? Check Out My "Daily Decision" System. Forget the fast money and the latest, greatest option trade. What investors need is a strategy to keep them "in" the stock market during bull markets and on the sidelines (or short) during bear markets.

    Turning to This Morning...

    The speculation of what Ben Bernanke is likely to say at his press conference on Wednesday continues unabated. At this time, it appears that traders are positioning themselves for a dovish statement from the FOMC as U.S. futures are pointing to a higher open. However, as we saw yesterday, the mood can turn on a dime so it is best to stay flexible.

    Pre-Game Indicators

    Here are the Pre-Market indicators we review each morning before the opening bell...

    Major Foreign Markets:
    - Shanghai: +0.13%
    - Hong Kong: +0.00%
    - Japan: -0.20%
    - Germany: -0.03%
    - France: -0.07%
    - Italy: +0.61%
    - Spain: +0.67%
    - London: +0.83%

    Crude Oil Futures: +$0.29 to $98.06

    Gold: -$7.90 to $1375.40

    Dollar: lower against the yen and euro, higher versus pound

    10-Year Bond Yield: Currently trading at 2.195%

    Stock Futures Ahead of Open in U.S. (relative to fair value):
    - S&P 500: +5.01
    - Dow Jones Industrial Average: +52
    - NASDAQ Composite: +9.94

    Thought For The Day...

    "Some men see things as they are and ask why. I dream things that never were and ask why not?" -Robert F. Kennedy/George Bernard Shaw

    Positions in stocks mentioned: none

    Follow Me on Twitter: @StateDave


    The opinions and forecasts expressed herein are those of Mr. David Moenning and may not actually come to pass. Mr. Moenning's opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of StateoftheMarkets.com and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. One should always consult an investment professional before making any investment.

    Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.

    The analysis provided is based on both technical and fundamental research and is provided "as is" without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

    The information contained in this report is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (NASDAQ:HCM) a Chicago-based money management firm. HCM is registered as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.

    Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.

    Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.

Back To David Moenning's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.