Thursday, April 25, 2013

Full Moon Changes Tides in Markets

The full moon arrives today at approximately 16:00GMT. This event has had an uncanny ability to reverse the tides of the stock indexes. There have also been several troubling events leading up to this event this week. First, there was the flash crash that erased $136.5 Billion of index value in 90 seconds. Then today, the CBOE (Chicago Board of Options Exchange) closed completely. They have offerred no explanation to traders. Keep in mind, the CBOE is the only exchange to trade the $VIX Futures, S&P 100 Options and S&P 500 Options. Traders can initiate positions in the Futures on the CME (Chicago Mercantile Exchange) that trade on the Globex electronic system, and although this market is larger and more liquid, the size of the contracts are smaller than those on the CBOE. Similarly, positions can be traded in the SPY ETF, but again, these are much smaller and would require a much larger trade to equal the same size position on the CBOE. In the end, investors that are long the market have to be very uneasy right now. Also, the U.S. GDP report will be issued tomorrow-- that headline along with the flash crash and CBOE closing today may be enough to trigger some enormous volume tomorrow. If it is later confirmed that the CBOE issue was a denial of service attack it will certainly unnerve investors. The shortfall in volume today could add to the total tomorrow, and that could certainly lead to an overload that would cause the markets to gap lower as we have recently seen. This happened in the Gold market recently, but a sell overload on the major stock indexes could create a much larger panic. The lunar event looming certainly has my attention.