High Frequency Trading has made trading the EMini a dangerous proposition.
Ditto for the Mini Dow. There Was a 600 pt trading range over night? Seriously?
These market manipulator programs exit at the discretion of the exchanges.
These HFT pay for market access by having their servers closest to the exchange servers.
Professional traders have known about this beginning in 2003 or 2004. It came full circle in 2008. Here it is 2011 and the average person is learning that its not a good thing for 1) liquidity, 2) transparency, or 3) Price discovery.
I predict before this is over the Government will regulate these trades. If they don’t they will leave markets in shambles. And if the perception is that a minority is taking advantage of the majority, I would not want to be in that minority when the birds come home to roost.
I myself am heading on vacation after Friday. I think there is more downside risk than upside potential in the grains, but that doesn’t mean we can’t go higher.
I maintain a long position in gold against 1600. With all the instability, the perception that gold is a currency refuge is more important that the reality, which is, it can never replace paper currency. As much as the Luddites would like to see it, in my opinion its like people longing for steam engines to replace jet engines.
Currency by fiat is necessary for a modern economy. Take us back to Year 1 with Pol Pot and Chairman Mao. Then gold looks perfect.
In a vibrant world economy, in order for it to grow and be diverse, you need a currency. Pure and simple.
For doubters, take Brazil after 1990. The replaced the old currency which had daily inflation of 2000 percent. They replaced it with a stable currency. 90percent of that success was due to the fact that people gained “faith” in that currency.
If people lose faith in one another, then we are in serious trouble.
Case in point: Riots in London.
A bunch of unemployed, under employed 20 somethings who have turned to anarchy. Why? Because they have lost faith in their society’s ability to give them even the illusion of a potential for a better life.
When people lose that hope, especially when they are in their 20’s, bad things happen.
Leaders in the US should take note. If people think the system is broke and beyond repair, then they revert to “lord of the flies” mentality.
As I write this ist 2:PM. Bond market it is closed. Now the Dow is down 160 pts at 1,658.
Unless you want to take 200 to 400 pts heat on positions, think twice about trading these stock indexes now.
When markets get “too stupid” for their own good, then its time to head for the sidelines.
Rule number one to successful trading is money management. Sometimes sitting and doing nothing is the best strategy.
I’d stay out of the markets, save Thursday’s USDA. September and October are waiting. There will be 20 trading days in every month for the rest of the year.
Sit tight.
CER
