Q1 2012 was the worst market performance since 2012
The Dow closed the quarter in the red for the first time since Q4 2012
Bios were up 3% for the best day in 2 weeks, and up 4% on the quarter which is the worst quarterly performance in 5 quarters, March was the worst month for Bios in 4 years.
Gold was the best performer of the quarter and High Yield Credit (Credit leads, equities follow) was the worst performer of the quarter.
Utilities were the best performing S&P sector of the 1/4 (utilities are considered a defensive play.
Judging by the above alone without even looking at this chart...
The IWM 60 min...
It would seem the change in character away from risk (HY Credit as the worst performing asset and defensive Utilities as the best performing S&P sector) and in to safety is very clear, which makes me wonder about a few things, namely...
Why is the FBI all of the sudden investigating HFT for "Abuse of information", trading on non-public or insider information" ? Why hasn't the SEC led any such investigation? WHY NOW?
Why is it that one of the seeming, "confidential informants" happen to be someone from Goldman Sachs who not only ran their own HFT, but were the lead underwriter for the HFT firm Virtu's IPO? This is the HFT that had 1 losing day of 1238? Does Goldman know something? Is HFT (as wicked as they are in destroying market structure) suddenly being scapegoated for an event to come that was caused by the F_E_D?
What is the new dynamics of the market going to look like as we move forward?
Interesting questions as the FBI announces an investigation in to High Frequency Trading, something the SEC failed to do for the last 5+ years and why all of the sudden urgency with certain public figures suddenly leading the charge and GS itself, an HFT user and lead underwriter of Virtu (HFT company going public)?
It makes you wonder what is being set up, we already know who and why, to give the F_E_D cover. I am VERY interested to see what the underlying trade looks like in the market come tomorrow and moving forward.
As for the market, it was led by the AUD/JPY, but seemed to lose correlation around the time the FBI announced their probe...
ES lost some gusto vs the AUD/JPY around the time the probe was announced by the FBI.
The market looked a big fractured, the SPY ended the day with distribution in the intraday timeframes with no solid base to move off of...
IWM has some 5 min positives, but not a lot so it looks to be enough to cause a head fake which it's already at, we'll see how long it can last, I think not long with such a small foot print.
The trend of HYG distribution / negative 3C divegrence continued today as it has for well over a week and VXX's divergence is growing much stronger, still not at the "flying" level, but that can happen quickly and this is only the second day in an event I've waited at least 3 weeks to see unfold, it finally started Friday.
Both GLD and GDX ended the day with strong 1 min positives, I continue to like both and will keep both positions open (UGLD and NUGT ).
GLD 1 min
I checked correlated assets for confirmation and there was strong bullish confirmation for both.
As far as Leading Indicators...
HYG was an under performer vs the SPX most of the day until the close, almost as if it were being held up which I'm sure is the case judging by some other leading indicators in to the close.
Sentiment (pro) also fell off badly most of the day until the close so I'm guessing they may try another pump and...?
Sentiment's EOD pump...
And VXX's smack-down, which is fine with me as it is what I was waiting to see, but it was obviously a move to keep the market up in to the close.
Yields fell off which is a negative for the market, but they can certainly fall further, especially if my thesis on the IWM/market is correct...So far this is what I'm going with short term, but there's not enough support for me to even enter a partial piggy back/hitch hiking trade (long/calls).
Otherwise, my main interest is how the FBI investigation effects HFT which is responsible for about 70% of the market volume, an even thinner market? If that's the case, then a stage 4 decline would be absolutely brutal and what is it that Goldman sees or is getting out of this? Perhaps providing cover for the F_E_D as they truly created the market mess/bubble, but with a multi billion dollar (PLUS) industry all of the sudden put on CRIMINAL notice, not SEC, things could get strange awfully quick.
I'd be very interested to see if the correlation algos give out, if so, the entire carry trade correlation could evaporate just like that along with HYG and the SPY arbitrage, but those are just a handful of literally hundreds of different programs running, all apparently on criminal notice tonight, it's about time, but they ought to serve the F_E_D up as well as that's where the real criminality and destruction of a healthy market came from.
What are they trying to cover up and scapegoat so quickly and so ruthlessly?
Tune in tomorrow, I'll be looking high and low for signs that any of these algos are shutting down (watch volume as well), it could be very interesting.
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