evening wrap, June 10
market vibes
June 10…)
“The first casualty in war is the truth.” Aeschylus 550 BC
Trading in NY was a mixed affair today. Gold, silver, platinum, and copper all settled about where they were at 2 AM EDT. Ranges were subdued with a defensive bias. The dollar recovered early losses and settled unchanged from Monday. Bonds were up a few ticks but well off their best levels, and stock indexes were predictably higher in measured trading throughout the day despite some periodic down sweeps. Oil traded above $65/barrel and fell $1.50/ barrel on a bearish API report. DOE stats tomorrow at 10:30.
In the Markets
The Dow has yet to exceed its May 19 highs. Open interest has risen about 15% since that date, and volume has been declining for weeks unabated.
S&Ps are still trending higher, albeit slowly. AI is in control of the auction so it is alwayd SSDD, imo, and it is interesting to watch the algo operate.
This is what I think it does: It reads raw trade flow to the matching engine, including the up and down resting liquidity, and measures a marginal imbalance of buying whenever necessary. It doesn’t need to participate on every bid offer, only to maintain a positive imbalance. Occasionally, a large imbalance of selling arrives, and the algo absorbs it like a soft pillow. When the selling subsides, it recalculates the marginal imbalance necessary to retake control of the auction, and prices resume their upward bias.
I did this… regularly… in the pits thousands of times. We called it “upticking.” I could add thousands to my PnL on any given day with a few 1-lot trades. If you had 50 locals trading an up or down day, they were an almost unstoppable force. When the market is in a serious trend day, the algo reads the outlier size and stops. However, it can restart any time its rules and conditions are “true”.
It is me, or what I once was, artificially, with an infinite balance sheet. What bothers me is not knowing who is the central operator? Possibly the model is so commoditized everyone uses it. TT was like that around 2003.
CPI tomorrow. Watch it through this lens. (S&Ps daily data chart below)
In oil, I’ve noted an interesting area on the chart. We saw $65/barrel today, the highest print since April 4. The drillers who can’t make money under $60 can probably make good money at $65 and spontaneous responsive selling knocked prices straight down $1.50/barrel.
Cracks were unchanged. Dec/Red Dec settled -15 contango. The. API reported another hefty build in gasoline and a build in WTI after the close
Bitcoin finished in the upper third of its range on ever lower volume. Low volume is not a bad thing considering the rest of the [algo] market is as bad or worse. IBIT volume was the lowest in 2 or 3 weeks.
In other Bitcoin news today: Michael Saylor said in a BBG interview, “I don’t think Jim Chanos understands what our business model is. We’re actually the largest issuer of Bitcoin-backed credit instruments in the world. We’re not a trust or a holding company.” In a nutshell, he believes MSTR deserves a premium. Chanos thinks the divergence between Saylor’s market price and the company’s Bitcoin-adjusted book value (as high as 200% last year) is a compelling arbitrage opportunity.
That’s about it for tonight friends.
my vibe
We can’t choose our parents or the air we breathe. We can choose the forks we take when we get them. The thing is, for a time anyway, we don’t have to choose anything. But we can’t go back. I wish…
night all… good luck in Asia
JJ
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JJ: I was in Cambridge Idaho supervising the drilling of an oxide copper show when I saw Secretariat win the triple crown. I was seated on a stool in a diner watching the black and white TV on the wall. There were half a dozen cowboys standing behind me. One of them quietly said, "That's one hell of a horse." The others murmured agreement.
A few years ago I drove through Cambridge on my way back to Canada after a winter in Palm Springs. The diner was still there. I went in and saw that the stools were still there, but there was no TV on the wall. I sat on the stool and tried to appreciate the passing of 46 years.
Me and 3 Pals skipped a school assignment to drive to Belmont to watch the Race.
Haven’t thought about that day in decades.
Thanks for the jolt to clear away the cobwebs on a great day. 👌