If you were wondering Thursday how the NASDAQ could remain stuck at one price for a period of time (about 3-hours worth) no, that wasn’t everyone getting bored: That was a technical glitch. As the NY Times recounts it, in their report over here, the problem comes just two days after Goldman sent out a bunch of errant trades and this gets us down to asking again some very difficult questions about the market.
First: Should there even be such a thing as high-speed trading? It’s like having a craps game being played while ostensibly playing roulette: You decide to bet on the number 6, but before you can get your bet placed, a whole bevvy of side players at an in-line craps table have yelled “Coming out! Six is hot…” Would you play in a casino where the big money is not on your roulette call, but is mostly being made at the in-line craps game?
Second: For an exchange which trades so many of the big-name tech stocks, you’d think there would be redundant systems on a hot/standby basis. You know, just like a RAID array in a serious desktop but bigger.
Third: Because of inter-market arbitrage, this has just a whiff of not-quite-accidental, since people like me who try scalp some very short-term trades now and then using the 1-minute chart and since the NASDAQ tends to be higher beta than the Dow stocks, this is definitely hard on compulsive gamblers….I mean investors and more to the point it screws up cycles which work fine as long as the markets are open but they disrupt other action…hence the “whiff.”
Fourth: Where’s the accountability? This is precisely the kind of trading accident that while not-too-damaging on a slow late summer’s session could be a wealth-killer for those trying to bail out of a meltdown in late October yet to come.
I may be stating the obvious here, but Jim Kramer nailed it on Mad Money on CNBC yesterday and in case you missed it, the video and transcript are over here. My favorite part is this:
okay, nasdaq we can’t ask you to build the equivalent of a plane withinplane, but where is the backup system? why isn’t there a server where the nasdaq can flip a switch and maybe slower maybe, but at some pace that makes you feel like it’s not a farce. we know there are such things as redundant systems. we know that they’re costly. i’m sure the nasdaq doesn’t want a sedge second system ready at all times because it would be expensive and hurt the earnings per share. aps, sometimes we sacrifice everything on the altar of profitability. the traders have so much clout in washington that i bet the s.e.c. couldn’t even order them to do that. blow back would be too huge.
There’s another example of what I’ve told you before: ‘Merica is living on borrowed time because the Big-Monied Special Interests have taken over Washington in the form of lobbyists and power groups wielding campaign money and persuasion blocks. And what used to be a dead-to-nuts honest casino is struggling to maintain that appearance, so long as you remember (and don’t mind) your bet on the roulette table triggers a craps game on the side while the slow wheel spins as the front-runners slice a tiny piece off every chip you play.
Not much on the econ calendar this morning so stocks are set to open up slightly. We are cautious later in the day as the market is near critical support levels and no one knows how crazy things could get in the Middle East over the weekend, so closing out long positions today is possible.
Asia saw a 2.2% rise in the Nikkei overnight but most of Europe is on hold, though formerly Great Britain was up 0.5% when I checked earlier.
As we explained to Peoplenomics subscribers yesterday in our monthly check of US West Coast Ports, there’s evidence that a slow economic recovery of sorts is underway. That view was underscored in Thursday’s Conference Board Leading Economics Indicators report:
The Conference Board Leading Economic Index® (LEI) for the U.S.