And here we thought former trader and current man who has it all figured out, Richard Breslow, was done for the week after Thursday’s missive which had a “to hell with this” kind of feel to it.
Luckily for us – and you – Richard had one more in him and dammit, it’s a good one.
Following up on yesterday’s note, which essentially suggested that this already-shortened week might as well have ended a day early, Breslow on Friday cautions that today will be an algo fest as the only “real” news (i.e. hints about which state Irma is going to destroy and/or new information about where Kim is aiming his ICBMs) likely won’t hit the wires while markets are open.
Of course what we saw overnight in yields and the dollar certainly suggests that people are panicking. Indeed, the title of an earlier post here on HR contained the word “panic.” But as Breslow writes, this panic is manifesting itself in erratic moves rather than a full-blown flight-to-safety because let’s face it, the central bank put is still squarely in place.
Read below for the best take on Friday’s markets that you’ll get anywhere…
Via Bloomberg
If what is going on in the world wasn’t so serious, it would be entirely appropriate to describe any market moves that happen today as the silly season. This is going to be pure price action, where greed is already off for the weekend and fear is the order of the day. The only game that’s being played is called Find The Stops. And be aware that the market will only selectively pay attention to noise or comments based on the positioning of the weakest hands.
- The only news that will matter is unlikely to happen during this trading session and the storm tracker radar plots are highly unlikely to tell us something new
- Remember those simple days when New York Fed President Dudley would speak– and people listened? On a normal day we’d be warned to remember that he’s going to give us his latest thoughts. Last night, all I heard was “yeah, yeah, heard it all before.” If he gave the same speech next week it would be parsed to death. But traders just aren’t in a position nor the mood to fade these current moves
- On the other hand, a Reuters story citing unnamed sources that suggests ECB Governing Council members mostly agree that their next step is likely to be reduced bond purchases sent the European sovereign bond market into a tizzy. We actually have a special file where we keep stories like this. No matter that Bundesbank President Weidmann, no less, reminded us that “inflation pick-up will only be sluggish and that uncertainty about the future path of inflation is quite large.” Mandates be damned
- To make matters even more extreme, for the balance of the day, there’s only Canadian employment numbers to distract us. And to be candid, after this week’s Bank of Canada news (they unexpectedly but appropriately hiked rates), the only people who will be even mildly interested are those who have a personal stake in whether 1.20 to the U.S. dollar will hold
- One thing that’s for sure is, this level of anxiety is compounded by the inability and unwillingness of investors to maintain hedges. The only thing standing between this being full-blown panic versus the frenetic gyrations we’re seeing is the central bank put. But that’s on them. They broke it and now own it. We’re just the infantilized yield hunters along for the ride
- It grates on everything I believe, but this would be a good day to avoid putting yourself at the mercy of the algorithms. They don’t understand that while you can set a fire, arranging for a hurricane is another order of difficulty
