Friends
Well, we finally have come to the end of a crazy week of trading. Once again, we had stocks swing in a 1000 point range in the Dow Jones Industrial Average. Just watching the trading (and that’s the best thing to do in times like this-just watch) and it’s amazing to see the Dow move in ticks of 10,20 even 50 points. Obviously, humans can’t trade in this manic matter. For the moment, we are at the mercy of the machines. Of course, no one complains when machines add to market gains (the silly blow off in January as an example). The barking only seems to occur when we are in a meltdown mode. What is getting the machines (algorithms) all fired up? Moving averages (today the 200 day moving average), liquidity, margin calls, forced selling, trapped levered hedge fund managers, repositioning risk parity funds – likely all of the above.
Today we saw stocks up more than 500 points on the Dow and down as much as 500 points. Stocks were moving hundreds of points in either direction in minutes. In the end the final swing was to the upside, but even that could not be for sure until the last second of trading. Anyway, by the close the Dow Jones Industrial Average was up 330 points to finish the day at 24,190. The S&P 500 was up 38 points to close at 2,619. Gold was down $2 to trade at $1,315 per ounce, while oil was down $2.09 to trade at $59.06 per barrel WTI.
It’s been a difficult week for market participants. Movement like this is disconcerting, but it is simply part of how things happen nowadays. Our first taste of how computers can affect volatility in the markets was in the crash of October 1987. Obviously, we are much more advanced these days, and the speed is much more dramatic. As bizarre as last year’s calmness was, this week’s volatility seems to be the market’s response. Let’s take a breath, gather ourselves, and have glass of wine (or two). We’ll be back at it next week.
Have a great weekend everyone.
