Buzz Bits: Dow, Nasdaq Slip Back
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Bell Buzz - Todd Harrison - 3:55 PM
- After trading, fading, legging and rolling, I ready for Turnaround Tuesday with a similarly small short-side position, albeit via October paper. Bonnie Tyler must be psyched.
- That opening fade (near S&P 1465) worked on an absolute price basis but was a muted return as a function of A) vols coming in (VXO-12%) and B) that darn bid-ask spread. Those Duke & Dukes make out like bandits Danny.
- OK, wait---so my shoulder was fine all weekend while running and playing tennis but hurts now that I'm strapped back in my turret? Voila! It's time for a new chair (or some new posture).
- I'm conscious of the potential for hedge fund redemptions but I gotta say that I hate trading invisible catalysts, particularly when I keep hearing about it on financial television.
- Was the action in Goldman (GS) today an encapsulation of what the tape will look like after and if the FOMC cuts?
- If you're not mandated to trade every day, DON'T! There are alotta funds standing in a circle shooting at each other. The S'Mores will be a lot easier to snatch after the crowd thins.
- Fare ye well, Minyans, and enjoy the night before tomorrow's fresh flurry.
Quant Funds... Highly Logical? - Sally Limantour - 11:37 AM
You will start to hear in the news from "Mr. Spock" funds (the quant funds) and the meltdown they took during this break. Just as Spock cannot process emotions, the quant funds cannot process market meltdowns as they are not programmed into their models.
In the latest casualties, we heard today from Renaissance Technologies that said in a letter to its investors that the fund had lost 8.7% in the first few days of August - and hinted that funds employing similar strategies to Renaissance could be to blame. Tyhke also came clean in a missive to investors, published on Dealbreaker, with losses of between 17% and 31% and, of course, Goldman's (GS) Global Alpha Fund. Matthew Rothman, head of the quants at Lehman (LEH), had this to say: "Wednesday is the type of day people will remember in quant-land for a very long time."
From the WSJ: "Events that models only predicted would happen once in 10,000 years happened everyday for three days."
I explain this so you are familiar with these quant funds and understand the logic of what happens when things turn against them: It is a good lesson and one that is taught every ten years or so. I have been speculating that with the speed of information and the global velocity of money we may be seeing these cycles more frequently.
Does time travel exist yet? - Jeffrey Cooper - 10:54 AM
If I could have seen today's headlines six months ago and read, amongst other things, of Goldman (GS) deleveraging certain funds and the losses at some of the best and the brightest such as Renaissance and Goldy...
...I would have thought the popular indices would be down substantially more.
They haven't even bled by 10%.
Although the average stock tells a different tale.
It will be interesting to see how the markets behave this week as the Ides of August is a date when funds must fess up and Friday is expiration. Kinda like pouring gasoline on a raging fire.
It is ironic that the Friday before Black Monday in 1987 was also an expiration.
Now I'm not sayin', but just so ya know.
Dandruff? Or inverse dandruff? - Bennet Sedacca - 8:33 AM
Only her hairdresser knows for sure?
I have drawn two charts - keep in mind this was at 6:40 AM before I headed off to an appointment. No, not with my hairdresser. But there are two distinct possibilities on an hourly basis for e-mini's.
Dandruff - a bearish sign.
Click to enlarge.
Or... Inverse dandruff, or a 'W' formation-a bullish sign.
Click to enlarge.
Given that there is a lot of news out this morning, the market could form a low here... sell bad news rumor, buy bad news?
Or are there many more cockroaches to crawl out of this roach motel?
Given the VXO being so many standard deviations away from the mean I would, water pistol to head, go with the bullish indicator.
But to be perfectly frank, I have no trading position at this time, just core longs in health care and defense and core shorts in credit. So you know...
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