Wednesday, September 1, 2010

The Volatility Continues

Stocks soared today as the ISM data came in stronger than expected.   In a nutshell here is the number:


The growth here is hardly impressive.  I think the market breathed a huge sigh of relief that the number didn't collapse like virtually all of the data has throughout the summer.

The ADP jobs number came in worse than expected but the bulls seemed to be too busy buying stocks today to notice:

"This morning, ADP, a payroll processing firm, put out its latest employment report. It isn’t good. Between July and August, private employers shed an estimated 10,000 workers; economists expected an increase of about 20,000 jobs.

Moreover, ADP revised down July’s increase from 42,000 jobs to 37,000. Over the past six months, private employers have added 37,000 jobs per month, according to ADP’s estimates. To put that in context, the economy needs to add 100,000 to 150,000 jobs a month just to keep up with the country’s growing population, and there are currently 14.5 million unemployed persons looking for work."

My Take:
I can see why Druckenmiller decided to get out his hedge fund.  This is a brutal tape if you are trying to trade on a daily basis.
The rally started off strong but the volume again was light and it tended to lose steam in the afternoon. 
The bulls and the bears have both been humbled by the tape this summer.  The market continues to trade in a range as the world waits to see what the economy and the Fed decide to do in the coming months.
I wouldn't be surprised to see the volatility continue this week.  Jobless claims are out tomorrow and we then get the jobs number on Friday.
I am sure Wall St is not looking forward to the jobs number after seeing the ADP report.   I expect it to be bad but it's all about expectations.   You have to also expect the number to be goosed in some way like every other data point that has come out of Washington lately.
The accuracy of new economic data has gotten so bad that I am starting to pay more attention to the revisions versus the newest numbers because it's the only data point that you can count on.
All I can say is I am glad I am not trading this market.  You are just asking for a whipping as these robots all trade with one another.
I wonder what the volumes would look like if you took the HFT's out of the game?  I am sure it would be pretty horrifying.  
The Bottom Line
From a macro view nothing really changed today.  The economy continues to show signs of weakening and the jobs numbers continue to look ugly.  Any positive news that we have seen recently has shown tepid growth at best.
Remember folks you need job creation of over 150,000 a month in order to see positive employment numbers.  We are not even close at this point.
I will keep it short today because the big news will be Friday.  I will close with some Davidowitz bear porn.


getyourselfconnected said...

I saw the screens this morning at 7am glowing green big time. By 8 they were monster. I had stuff to do and when I got to check the ADP number was terrible and the ISM was slightly better than expected. Best reason I found was talk Obama would extend for 1 year the Bush tax cuts (imagine that headline!; that dude is nuts if he does that after all he said about them!).

These days where every stock moves in sync and all at the open are crazy wild! It goes up and down. All of this would be fun if it was not so important. I have more over at the site, I was in a rare mood tonight so beware!

Jeff said...


I will come check it out.

I totally agree around the importance of all of this.

I spoke to a credit trader today and he is flat out scared to death about our future.

He said he has never seen daily swings like this on the ten year bond in his three decades on Wall St.

He thinks they are trading the shit out of the credit markets.

They love this volatility where the ten year moves up and down by a point.

He said daily moves like this in treasuries are unheard of and are extremely unhealthy.

I've never heard him so gloomy in terms of how this all ends.

He also said it's time to get nervous when the hedge fund traders decide to walk away from the game.

getyourselfconnected said...

Yes, when any asset class becomes "hot" it ends bad, but as you say that may be well off.

Makes me laugh when folks say gold/silver is a crowded trade!

If gold did 600 billion in inlow like bonds, gold would be at $6000! Get back to me when it happens!

theArt said...

Wonder if this is somehow related to the upswing today?

Jeff said...


I think gold will get its turn.

I find it interesting how well it's holding up as treasuries crash.

Seems like traders are preparing for both deflation and inflation.

I am sure a loss of confidence in currencies hasn't helped either.

Jeff said...


Yeah I don't get that whole story.

How did the guy lose that much money as bonds soared? Was he shorting them?

I need to get my arms around that.