What’s Behind The Whipsaws?

If the intraday ups and downs are making you dizzy (the Dow was up 200 points just minutes ago, down 230 as I type), know that the market these days is — to no small degree — being pushed around by, let’s say, non-traditional, or mechanical (although humans do program the machines), forces.

Here’s from last night’s note:

“It’s a fairly safe bet that the amazing moves/whipsaws in both directions of late are largely algo-driven. I.e., momentum in one direction is chased, the market hits programmed levels (in various metrics), funds cover and move aggressively in the opposite direction.. I.e., the market has been largely driven of late by players who lack emotion (computers), have no cash buffers, and, thus, as equities sell off in a hurry, are left to liquidate assets, say bonds and gold (prior winners), to cover those losses — creating unintuitive moves in asset classes that are typically viewed as safe havens.”

Here’s from my pre-market notes this morning:

“Could see a brief respite for equities end-of-week as options expire (although huge global headwinds persist), and near the end of the month as portfolios rebalance (“).

Fed just backstopped prime money funds (announced last night). And this morning announced that it’ll provide US dollars to foreign central banks via swap lines. They’re hoping this works to alleviate upward pressure on dollar versus intervention in the spot market (not working so far this morning) — that could also alleviate some of the pressure on equities as well…”

Bottom line, don’t count on anything from the market for the time being, except volatility… 


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