Morning Audibles 5.10.10 Flash Crash Rewind

Because of this news:

EU Crafts $962 Billion Show of Force to Halt Crisis

http://www.bloomberg.com/apps/news?pid=20601087&sid=alxKmD3w0yqY&pos=2

Futures are up more than 5% and it appears that the 'bid' on the S&P futures will take the market to an OPEN around 1160...

Which leaves CV to ponder (a point that I rigorously debated and defended, ON MY OWN, last week)... A certain WSWB was credited as being a "genius", a "hero", last week for going all cash. As I recall, the SPX was at 1154 at that point that the announcement was made... CV pointed out that it was "pure luck", and that, in fact, many of the traders on this blog had already made "short bets" closer to the 1219 level.

My point was, how in Sam Hill could any computer algorithm predict a "Flash Crash" (for whatever reason it was precipitated - which is a subject that has already been endlessly noodled)... I suppose, those same algos weren't set with the same parameters that there would be a $962B (that's a "B", not an "M" for the fat finger types - Tuesday they'll probably come in and say that they "fat fingered" that bailout as well and the markets will tank again) bailout announced on Sunday night...

Anyway, here we are back OVER the SPX level that TWSWB made his famous announcement (and bathed himself in accolades for)... Is he still a hero? Sure, I guess...

It works the same way with the market itself... When the market is "melting up", it's supposed to be that way... There's no such thing as LIMIT UP...

CV is just this guy anyway... Nothing to see here, go about your business...

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Posted by Andy T 5/10/10

Good Evening Capitalists,

This author doesn't have any clue about what happened last week, so I won't even pretend to understand or explain it. "It is it what it is." This is what can happen in markets where almost everybody is long and nobody is that short. That is why stocks can go 'bidless' and crash. It was probably some sort of "mistake" that caused a stock like Accenture to hit ZERO in a nano-second, but the way this "mistake" caused all Global stock exchanges, commodities, bonds and currencies to all react in a hugely negative way should serve as a powerful reminder of how "fragile" and connected these markets remain. So much for diversification....

There is only one way to diversify: Stay long some amount of cash*.

*Cash does NOT mean municipal bonds, corporate bonds, US Treasuries or money markets.

DXY Update With Some S&P 9 May 2010