The 'age of computerized robotic trading' is not a 'fear for the future' but a reality involving AI that is already affecting market swings.
Structural positioning is significantly improved, if still rocky while the dust settles a bit more; after the drubbing related to the South Korean crash and the associated 'cross-asset-liquidation' sequence that made its way to U.S. markets in an alternating fashion over the last couple of months. Seoul taking measures to calm (and better regulate) their markets may have eased tension.
That's not to say we have a runway for 'all clear' takeoffs here; but the debris has somewhat cleared from the runway; so gradually flights can position with at least better results of not being sideswiped while taxiing for takeoff (which in some cases could be late this year or early next; but also notably variable).
Speaking of 'flights'; the USAF is likely active over Iran this weekend as news covers extensively; so very hard to see if that offsets 'sugar-coated' news of a 'deal' for Hamas to wind down (it's conditional and again; can't trust terrorists).
Market x-ray: sort of 'embedded uncertainty' extends (especially as relates to 'war', and less so South Korean fallout as they work to reform their rules thus taming some of the wild speculation there, which radiated over here through the (ironically named) 'Situational Awareness' Fund and others mimicking it.
So Microsoft (MSFT) rebounded; Apple (AAPL) had the worst day in years; as otherwise it's been a mixed bag going into this 'military weekend' environment. Late Friday Iran struck multiple oil tankers moving through the Persian Gulf escorted by the U.S. Navy... at this time we have no information on whether U.S. Navy engaged the incoming ordnance or any details. However it's provocative and so would be the hacking of Minnesota (or other) water supplies 'if' they did it.
I had a chat about a couple topics with Gemini (AI) today; and contrary to the claim before, it remembered details about a prior 'conversation' that AI is not supposed to retain. It was simple; such as a question about 'cars' and why did it recall my interior trim and color. It shouldn't have once I closed a prior chat. I mention this because it's just a tiny example of AI not exactly 'as advertised'. I reference the concern of a Toronto Professor as it sort of scales the situation.
The 'age of computerized robotic trading' is not a 'fear for the future' but a reality involving AI that is already affecting market swings. 'So far', AI generally doesn't 'reason' sufficiently and tends to merely follow trends and patterns (not talking about AI analysis or fundamental summaries but actual trading algorithms)... and that's dangerous as it tends to amplify a trend (either direction); and actually impedes judgement as to the merit of extended moves up or down. I'm not sure I care to utilize such methods; but want to be aware of how they can distort 'otherwise' normal moves. In this case it was South Korean 'youthful AI implementation' in memory and other stocks that kicked-off the chaos and alternating swings (that were not 'merely attributable to the War, Trump or Oil moves; certainly not at all the 'Fed'. It bears being aware as the human response should be trying to recognize when 'such mechanics' overdue it one way or the other, and then accordingly 'fade it' betting on going the other way soon. That's essentially what we did with the purge on Thursday, which was more than a 'dip'; and we'll see if greater calm prevails in the post-military weekend.
So, churning and mostly de-risking was sort of a Friday feature; now we have roughly 11 weeks with S&P around the same 7500 +/- area. So the extreme roller-coaster swings of July (to the extent fomented by the near-collapse of the 'Situational Awareness' Fund, are likely behind; however now degrees of 'more traditional' (if uncomfortable) volatility still beckon for August.
That will probably be more evident in 'classic' big-cap tech stocks (which are still uncomfortable and unstable); while concurrently more groveling for solid technical strength is reasonable by new-era tickers; as they shuffle without a clear determination of where they eventually head; except where there's news or particularly impressive 'results' that aren't merely 'financially engineered' by adjusting for Warrant or similar difficult to interpolate aspects. (That's why for a couple stocks EBITDA may be more revealing than the formal numbers..as well as breaking down individual operating units to evidence contributions to total revenue and P&L for those units.)
Thus: pending 'deals or no deals', or 'contracts or no contracts'... perhaps more important (since all should get some degree of additional business when from government(s) or commercial clients) those able to avoid various offering or non-accretive dilution registrations and so on, should do better. And tickers restrained by dilution 'already', ideally will substantiate that they're integrating business synergistically, or justify dilution; insider sales, or so on.
Bottom line: Friday seemed tense at moments, but was ok considering it's a military weekend and during the market hours we heard of new Iranian IRGC attacks on 'escorted' tankers traversing the Persian Gulf. So in the context of war news, and compressed valuations in so many tickers, it wasn't really bad.
War news (or not) should increase over the weekend; and that may impact a start to the new week. However if that's not much of an impediment I'd look at some sort of effort to move higher in August's first week; regardless of 'Dog Days' that may follow. We are probably past the fallout from the 'Fund failure' (if it wasn't fire-sale Citadel wouldn't have jumped in..) thus might see some of the structural positioning issues relieved at least for now... as I noted before Thursday's rebound and then on Friday we meandered, which wasn't so bad considering the ramping of tensions and conflict with the Iranian regime.
I'm 'not' planning any Sunday night update on 'X' barring some calamity. If no calamity we'll look for some ebb-and-flow and then an intraweek rally effort.
Disclosure:
This is an excerpt from Gene's Daily Briefing (distributed nightly), which typically includes videos as well as more charts and analysis.
Comments
Log in or sign up to join the conversation.