Shanghai Drops A 6%’er On Us
Equities start the day lower as Shanghai drops a 6%’er on us. A one day decline of 6% brought the famed Chinese index back to levels not seen since May 22! In fact, on a 1 week trailing basis the index is still POSITIVE. How about that factoid? Imagine the S&P dropping 6% in a day to return to a level seen just a week prior…hilarious. I wish I had clients trading this thing because it would make for awesome conversations. “Hey, how about that move last night? It’s ok, even with a giant 1 day drop we are up 43% YTD.” Dan Strumpf of the WSJ wrote a fantastic article that you have to read if you transact in US equities (relevant for institutions primarily). In it he talks about the fact that volume has gone wonky on us. The profile of volume used to look like a smile, lots of action in the morning then a lull around lunch then lots of action around the close. Lately it’s turned into a J, and if you care about VWAP (I mean who doesn’t, what an awesome invention. ugh) this article means the world to you. I’ve argued in this space that a human is the best defense against algos, especially in panics like the Flash Crash. This story/trend is another example of why having a good partner on the sell side can add incremental value to your process. If your trader doesn’t understand why this is going on, and isn’t working around it, then they are doing a disservice to your execution costs. I see this play out every day, and adapting how I work client orders is something I iterate all the time. I’m glad the WSJ wrote this article because it should kick off a discussion about how the nuts and bolts of trading is currently evolving. Anyway, let’s see if we overreacted to anything about Greece or the Fed today.
After the open we did catch a few headlines that Greece was nowhere close to a deal and the market did sell off about half a percent, but it was tepid action. 2,121 down to 2,112 but then it settled into a sideways grind the rest of the day. We’ll keep this section short because honestly there isn’t much to talk about. $GPRO was the big winner, up 7%, because they are thinking about making a drone. If it’s anything like this right here I’m all in. Other winners were WDC, JCI, RL, and CMG. Any new all-time highs today? ATVI, BF.A, and IMAX. So maybe people are boozing while playing World of Warcraft on big screens? USA USA USA. Losers were primarily energy names like CHK, SWN, CNX, and RRC but URI lopped off 8% after speaking negatively at a conference. Dick Fuld capitvated our attention around lunch as he spoke for the first time since 2008. I don’t know what to think here..…I get that Americans love a good comeback but aren’t there people who should just fade into the history books? Who am I to judge though, my contribution to society might be a Wall St blog that typically ends with people hurting themselves. Speaking of that, I have a good one tonight!
The afternoon was a snooze fest mixed with elevator music and we closed at 2,120, down 0.12%. Absolutely nothing incremental came out of today (we are still going nowhere fast) so let’s wrap this puppy up. Unfortunately Friday is shaping up to be dire, most of the big catalysts are next week (ECB, Jobs report) so my hopes for wicked volatility are exiting stage left. One final thing before we blow this popsicle stand: Transports were weak again so make sure you have that on your radar. I just don’t think this market can sustain new highs while these things sustain new lows (I haven’t switched to bearish, it’s just weird to see). Curious divergence my friends.
Final Score: Dow -20bps, S&P500 -12bps, Nasdaq -17bps, Rus2k -10bps
News Highlights:
Not much out there so let’s skip to the big finish.
Tonight we have the worst zip line accident I’ve ever seen. Actually it’s not just the zip line, it’s a bunch of other crazy accidents, but the zip line one looks so painful.
https://www.youtube.com/watch?v=Z8Bf0B_PM-Q
Have a good night.