Friday, May 8, 2009

Bizarro Market: End Of Week Edition

A frail attempt to explain some of the stranger performance reported previously on Zero Hedge.

SPY heatmap
: New (financial) trash leads the way, inflation up, deflation down.

Quantology: Faster moving quants replaced old trashy shorts with new financial and REIT trash long positions and won the game of competitive re-leveraging. Obviously, widely-held household name consumer staples (you know, companies with solid fundamentals) replaced old trash on the short side of the quant books. Aggressive, agile smaller, faster quants kept on sucking away their larger brethrens' p&l.

Dead Presidents: The Spot Dollar index sliced through 200 DMA and the weaker, err crushed, dollar should have benefited international powerhouses of consumer staples but unfortunately that would be only far too logical. Doing what makes sense has been a sure way to loose valuable capital in the very short term (yet well backtested in the past) and those strategies have been promptly depreciated for good.

NYSE volume: Chunky NYSE volume was again dominated by quants and punters in financial stocks and ETFs. Individual names in anything financial were chased with reckless abandon. Who needs the safety of index ETFs? SPY had volume inline with its 20 day average.

Boiler rooms: TARP-o-matic quantitative SLP boiler rooms provided 'liquidity' for quality PG sellers all the way down almost 2% at ever lower bids just to cover shorts into the close. PG closed up paltry 0.45% on short covering strength underperforming the S&P 500 by almost 2%, while FITB was up 59% on a rocket fuel trail mix of moral hazard, short covering and unlimited intraday leverage of institutional punters. Boiler room prop quants enhanced their winning day by loading up into FAS longs and FAZ short. FAS closed up over 20% and FAZ down about 21%.

Advertised SPY Vol: Looks like the nation of Swiss domination continues, although our MS friends are stealthily creeping back over the horizon, yet not shiftily enough to avoid radar detection.

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