Rage against the algo

This week’s US equity trading is all about the robots taking over.

The markets have been the victim of High-Frequency Trading. The black boxes whipsawed stocks back and forth with little regard for anything but the next sub-penny move.

Many 200 pts. down, 300 pts. up intraday moves have the hallmark of algos grabbing pennies each and every nanosecond.

The SEC is the one making all the money by charging these firms a trading tax. That’s why the black boxes are tolerated, they provide liquidity to the SEC, not the markets.

The one take away from this week is it’s going to be a bumpy ride downward this late summer to early fall.

The bias is to the downside as China is screaming recession and Europe is riding those same coattails. A global slowdown is in the cards.

When NY Fed chief Bill Dudley said September is unlikely for a rise in rates he certainly knew the GDP number was going to be 3.7% seasonally adjusted annual rate.

That questionable number along with the lower (but no less questionable) unemployment rate should allow the Fed to raise. But we don’t see the cards in the hole that they hold.

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