Tag Archives: HFT

Is Desperation Setting In?

Central banks in the West are emptying their vaults in an attempt to maintain the illusion that the national currencies they manage are immune to monetary debasement.  The central banks are trying to perpetuate a system in which governments believe they can borrow and print money endlessly to fulfill the impossible promises of politicians.  – James Turk on King World News (link)

After the metals staged their usual overnight rally while the physical gold hoarding Asian markets were open, this morning featured two HFT-algorithm flash crashes.   One at 7:00 am. EST and one right at the Comex open (the latter occurs at least 85% of the time).

This graph illustrates the action – note the long “wicks” at the bottom of the red candlesticks, which is our indication that the flash-crash operation triggered computer-driven “stop-loss limit” selling from the hedge funds:

(click on graph to enlarge)

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Neither attack on the metals was accompanied by any possible news triggers.  The dollar didn’t move, which is something we would have expected if there had been some kind of fundamentals-based trigger.  The SPX futures ramped up at the same time the metals were hit in the first flash crash.   It is clearly unmistakable Fed intervention designed to keep a lid on the recent rally in the metals.   But why?

The intervention in the gold/silver market reflects desperation from the western Governments/banks, especially the U.S., in order to prop up the U.S. dollar.   Russia and China are getting ready to sign a series of gas/oil deals which will be transacted using rubles/yuan.  Russia’s main bank just signed up for China’s equivalent of Visa/Mastercard after the U.S. sanctions restricted the use of Visa/MC in Russia.   The dollar has dropped back below the critical 80 level (US dollar index) just as quickly as it popped back over 80 after Janet Yellen delivered her highly “engineered” post-FOMC meeting press remarks.

It is becoming increasingly clear – at least to me – that the U.S. economy is now a walking corpse.   The housing market is about to go into free-fall like it did starting 2006.  How do I know this?  Because of the exhaustive analysis I’ve been doing on the housing market data and because the homebuilder stocks are now diverging significantly to the downside from the rest of the stock market.   The homebuilder stocks behaved this way starting in mid-2005, about 6 months before housing market reflected the deteriorating fundamentals of the housing market back then.   The homebuilder stocks similarly peaked in May 2013.

There is a big “accident” in motion for which impact could occur at any time.   The stock market action from Friday thru Tuesday is an obvious signal.  The quick reversal from its recent dead-cat bounce is another.  The dollar is in big trouble and the Fed is trying desperately to fight that by suppressing the metals. When that fails, I bet we’ll see an escalation in military operations.