Briefly

Well, that was certainly exciting!

I wasn't able to post here while the market was in freefall. But I can tell you that people are not believing the "rogue trader" story, certainly not by itself, and least of all not with 15 minutes (being reported by several traders) of "no bid."

The leading theories right now are interconnected high volume programme trading, akin to 1987. We were a small number of DJIA points away from trading halt before something happened and someone took action to halt the waterfall and we ended down "only" 3.25%. I don't know what happened yet.

Yeah. I'll post about this. Believe it.

Trying to pull things together down there

Today was not good.

No-link reports: "Bloomberg radio is saying that 'many' P&G and Accenture trades will be busted, and expect many other names to have a re-painted tape. 3M was also mentioned, but the sentence was interrupted and there was a subject change."

Report: "Citi about to hold press conference and full-court press on news TV; Bloomberg is saying that Citi will say that their total futures dollar volume today was only $9 Billion, and will insist that the $16 Billion shove had to come from elsewhere. Citi is planning on a doing a flood of press tonight proclaiming their innocence, and have warned media to be careful about tying Citi with any improper act. Citi is swearing that they played no role -- Citi about to do a big round of press on news shows starting immediately."

Report: "Government regulators are now said to be digging deeply and are looking to suspend licenses." Whup, here's a link to a breaking story confirming that.

All this is because of the period of no bid. Accenture traded at 1¢. Exalon traded at 0.0001¢. Centerpoint traded at 0¢, yes, zero. Boston Beer Company (Sam Adams Beer) traded at 1¢. Rydex traded at 14¢. IBM reportedly traded at US$41 and that one might not get painted. (edit: ...and may've. The latest "daily low" for IBM is up over $112 again.)

A lot of people are trying to talk about this being triggered by a fatfinger trade on P&G triggering a spike down in the DJIA, which triggered a lot of programme trading - but that doesn't line up with the actual trades. The DJIA started cratering before P&G moved, if the ticks I'm seeing are correct. Karl Denninger is screaming for the high volume automated computer trades to be shut down immediately. So's Senator Ted Kaufman (D-DE).

This article includes a lot of comments from traders about the panic. And it was absolutely a panic. Key: "There is no real liquidity out there, it's all machine and phantom." Which is what a lot of people have been not quite willing to say for a long time, and a few people have been willing to say but are ignored. Most of this rally over the last few months has been on machines trading back and forth with each other.

The midday loss set a record in terms of absolute points lost on the DJIA, according to Marketwatch; the second biggest swing ever, which is different.

Rumours are flying about a "managed" open for the markets tomorrow. I don't have any good data on that but if they're going to be repainting a lot of tape, there'd almost have to be. Amusingly, the "Hindenberg signal," indicating that a crash is possible, is screaming red on, tho' it wasn't on when the bounce crash today actually happened. (The indicator is "75 new highs and 75 new lows on the same day" for individual stocks, and indicates extreme volatility. Today's new highs: 152. Yes, 152 record highs. Today's new lows: 442. I can't remember seeing this before.)

Here are some things I've been noting before today and saving in tabs for my next econ post:

Retail sales were not good in April - down from March. They're blaming the weather and Easter, which is amusing since they also blamed March's numbers not being as high as they could've been on... Easter. Yeah, whatever.

The three-month LIBOR rate is up a bit, and the TED spread is at the tip now over the top of the Federal Reserve range. Nothing to be alarmed about here yet, but the trends are in the wrong directions as measures of European bank risk spike to record highs and CDS rates on Euro debt skyrocket. Todd Harrison at Minyanville comments on the European Central Bank's desperate search for a way out of this mess. The Euro absolutely tanked today.

Freddie Mac lost several billion dollars in the first quarter of this year, and is looking for another US$10.6B from the Federal government. Meanwhile, the Federal Reserve is quietly lobbying against any reform effort, particularly an audit.

Greece's parliament has voted for the bailout package - which will suck - and the Greeks want no part of it. Neither do the official opposition New Democracy, which decided to vote against the bill - and which torpedos any hope for its long-term viability.

California's April tax receipts came in much lower than expected or usual.

The TSX, by the way, did pretty well, despite a big kick in the face midday; it closed down 0.28%, or 32.7 points. The Globe and Mail has this article on climbing Canadian debt. The Bank of Montreal is alleging "huge" mortgage fraud, suing hundreds of people in Alberta. Garth at GreaterFool.ca says this is the bubble blow-off, and this bubble is in the process of popping.

US home sales jumped a bit in March, hitting a five-month high as home purchase tax credits spur demand. And ADP job projections in April look kind of okay.

It's gotten much harder again to take capital out of the US, as it is now enforcing capital controls. You basically get a 30% tax on outflows now over $50,000.

...which brings us back to today.

Everything here says that the markets bounce tomorrow, maybe for a few days, but confidence is trashed. Charts are trashed. Anybody who tells you they really know where we are is full of it, including me. Everything large smashed through all their trendlines except oil (south, gave it a shot), and stayed out of range even after the bounce. I stress: the late recovery didn't fix these things. Gold shot north liek woah, breaking all its trendlines on the high side, which is, as they say, "indicative of sovereign risk."

Fundamentally, something today went very wrong. I don't know what. If I'm pushed against a wall, if it's not some sort of fantastically successful fraud and hack (which will destroy anything left of confidence in the trading systems), I'll guess that somebody very large needed a lot of money and needed it right now at any cost, and, well, they're probably in Europe. And that smashed through the paper-thin computer-driven rally of the last several months - and the accompanying complete lack of actual confidence - to create a true market panic. Sure, half of it was high-volume automated trading, but about half of it was organic, and the panic was absolutely real. There were multiple minutes of no bids on stocks. None. No. Bids. That's crazy talk but reality. How long this period lasted depends upon source, but the shortest no-bid freefall number I have from a good source is two minutes. That's eternity.

And then somebody even larger than the main sellers, with even more money, conveniently already in dollars, stepped in to pop the markets back from the brink. I don't know who, but my list of candidates is pretty damn short. I imagine yours is too. But even with this bounce, today's paper losses were around $500 billion. It'll take a lot of repainting to cover over that.

Lots of paint; Japan now open

Bloomberg is reporting that NASDAQ is going to cancel all trades +/- 60% above or below the prior trade. (Under "Clearly Erroneous" trades rule, filed May 2009. MSNBC says affected trades are between 2:40pm and 3pm Eastern time.

See, here's somebody's video showing the Dow already down 560 with P&G still just down $1 or so. Yeah, P&G also tanks and sends things lower but the DJIA was already trashed. I'm seeing this across multiple charts.

Breaking (courtesy xenoweeno): NYSE, Nasdaq, will "cancel all trades executed at prices that were greater than or less than 60% away from the last printed price prior to 2:40 p.m. Eastern time, up to 3 p.m." This repaints the entire day. Assume ALL stock exchange data from today is pending repaints. NASDAQ insist that there were no technical failures during the event. The stocks listed as affected by NASDAQ action are here; it's a huge list with huge valuation adjustments. This is a big. fucking. deal.

Nikkei is open, and down 414.14 (-3.87%) out of the gate.

eta: Ooooh, I missed this, earlier: Swiss central bank stops defending Euro, allows the Franc to rise against the European currency. That was this morning. Interesting.

And that's a wrap

Zero Hedge on the crash bounce:

In 20 minutes the market showed that it is as broken as it was at the nadir of the market crash. Through its inactivity to investigate the market structure, the SEC has made things a million times worse, as HFT-trading seminars for idiots are now rampant. HFT killed over 12 months of hard fought propaganda by the likes of CNBC which has valiantly tried to restore faith in our broken capital markets. They have now failed in that task too. After today investors will have little if any faith left in the US stocks, assuming they had any to begin with. We need to purge the equity market structure of all liquidity-taking parasitic players. We must start today with High Frequency Trading.

Recommended reading.

Lost in the noise today was that the attempt to force break-up of "too big to fail" banks failed in the Senate. "Too big to fail" looting will continue, at least for now.

Jonathan at America Canada carries forward a bunch of notes from other sources including "The Death of the Triple-A Sovereign;" it's worth a read.

Dr. Roubini of RGE Monitor, in video interview on CNBC, talks about what he expects to be a a solid three bad months for the market.

The US dollar index has stabilised at around 84.8, for the moment, halting several days of rise. The Japanese Central Bank is moving to lower the value of the Yen, which has been rising quite a bit; they've punched it for about 1.6% so far today, and the Nikkei has responded favourably. The Euro is stabilising a bit tonight; rumour says there's support action out there, but the European central banks are keeping mum. The Pound Sterling is taking a bit of a beating.

There's a US jobs report out tomorrow; it's expected to be pretty good. Chief Executive Obama is going to make a special address on the topic, which almost certainly means it is quite good; rumour is +100,000, excluding census hiring. I forgot to mention back in January, but the 585,000 jobs added via the BLS birth-death model since the previous April 2009 baseline were reduced to 158,000, retroactively. That's clearly what January is for.

I saw data on the consumer spending numbers that have been climbing this year; it all comes from cuts in savings rates and government outlays. The private economy isn't helping yet. Sorry; no link.

A while ago, I posted suggested reading on the M1 money multiplier, and this followup post. Money velocity is still quite poor - actually worse when I made those reading recommendations - which implies bad things about liquidity, which leads to spikes like today, and so on.

Seriously, markets haven't been this unstable in a while. And Europe's a mess. It's currencies and equities and you're seeing CDS spreads rising and I've seen this before, recently even, up close, and I didn't like it. So were I in the EU, I'd be making sure I had a little earthquake cash. Just a little, just to be safe, the kind of stash you should have sitting around in the event of an earthquake or typhoon anyway. Nothing more than that.

I want to stress that this does not feel nearly as dire as October 9, 2008 did (the UK came within about three hours of a systemic banking collapse the very next day, which would have triggered disaster throughout the modern economies), and this time, governments and banks are all really, really watching for all this, which matters. A lot. I'm not seeing that degree of chatter, and all of these factors are reducing the fear level. But... I'm not in Europe. I'm not in France, I'm not in Portugal, I'm not in Greece, and that affects what I see and hear and tones things down for me. Also, this time - if there is a "this time" - we've had a real warning shot. All these bring perception of risk down.

But.... something isn't right. There's no explanation for what set off today, and my best guess is still that this means somebody needed a lot of money, quickly, no matter what. And we don't know whether it was resolved. We just don't. That same kind of thing happened a few times in 2008 - it showed up in exchange rates and stocks both - and, like in 2008 when we saw these events, we should see a bounce that carries out a little while. But even with that, well, we know how 2008 worked out, don't we?

It's rather late here in Cascadia; this is my last post of the night. The Nikkei is still down around 3% (-330.39) after rallying up a bit midday; Hong Kong is pretty stable (down 0.7%, 140.36) at the lunch break. Moscow isn't open yet, but will be in a few hours. Good morning, Europe; good luck, everyone.