a standing 8 count

market vibes

April 23…)

Data releases this morning include home sales and the Beige Book at 2 PM EDT

In the news

Optiver Holding BV, a Dutch firm, is offering direct light-speed connectivity to retail traders. Their mission is to “set up direct connections between Optiver and buy-side investors, cutting out the brokers and exchanges, challenging the established stock-trading order.”

According to Bloomberg: “[Rival market makers] including XTX Markets and Tower Research Capital are also providing liquidity to the buy side on a bilateral basis, according to people familiar with the matter, albeit with a broker showing quotes and handling settlement. Goldman Sachs Group Inc., which acts as both a market maker and broker, has recently started streaming quotes directly to its money manager clients, another person familiar with the matter says.”

I think everyone knows by now that the quotes we see on our screens are merely a sample of trade flows. Humans are incapable of sensory perception at light speed (microseconds). The blink of an eye is 50 milliseconds, a thousand times slower than a high-speed trade. Anything faster than a blink is completely dark. It is likely we are the last generation of traders.

In the markets

Gold took a standing 8 count yesterday, sagged a bit overnight, and steadied up in London this morning. Obviously, Comex was an echo of the larger market yesterday. Despite very high volume in futures, open interest (OI) rose by less than a rounding error of 400 lots.

Whenever a large move occurs and open interest does not change, one side of the open interest is substantially inactive. In this case, on the Comex, that would be the longs, I think. Selling from overseas was probably physical LBMA/SGE gold and hedged on Comex during the session, but by the close, all deals traded flat. For every old short that covered, a new short entered, and for every long that got out, a new long came in—more sellers than buyers, of course!

In a nutshell, prices swooned somewhat dramatically, but the technical damage was more cosmetic than structural. As I said last night, there is a formidable void below the market in longer time frames that will require many more sellers on the order of yesterday’s magnitude to trade through. Will it be tested? Probably if the dollar strengthens. If the dollar goes lower, gold will be a few million ounces lighter on the long side.

Silver, copper, oil, stocks, bitcoin and platinum are all higher and coming up next with Bill Murray in the vibe. Here we go.