Monday, August 24th brought you one of the weirdest trading day ever seen in the past several years.
So to sum up what happened today, here are a few charts, courtesy of Bloomberg, ZeroHedge and NANEX — time of the events may vary :
- It all started sometimes in China, when it’s business as usual these days :
- S&P Futures followed, kissing the dirt :
- Which then started a major liquidity squeeze on the US market, as seen on the following charts by NANEX :
- Causing buy-sell orders to never quiet match — courtesy of ZeroHedge :
- Shortly after the opening bell, something like this on the Dow Jones :
- And an impressive rise on the VIX :
- In the meantime, major (mini) crashes :
- To prevent further deterioration, just press the “HALT” button across major indices, including 3 consecutive press on the NASDAQ and 1’200 times during that day :
- Then the master of markets, Tim Cook, dropped an email to Jim Cramer stating the following :
I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks.
- Then, all of a sudden, while unrelated from the previous event — well, who knows :
- …While European markets will stay stucked for a little longer :
There’s more to it for sure, but here are some events, mostly correlated, to show the newcomer what’s up for today on the trading side.
Finally here’s a fun tweet from Josh Brown :
@ReformedBroker: Look, it doesn’t matter what you bought or what you sold. The important thing is that you panicked.
Follow-up on the previous article, this one from Arthur Berman for Naked Capitalism :
Prolonged low oil prices will prove that tight oil plays need at least $75 per barrel to break even. When oil prices recover to that level, only the best parts of the tight oil core areas will be competitive in the global market. As production declines from expensive tight oil, oil sand and ultra-deep-water plays, inexpensive Saudi oil will gain market share.
Saudi Arabia is not trying to crush tight oil plays, just the stupid money that funded the over-production of tight oil. Too much supply combined with weak demand created the present oil-price collapse. Saudi Arabia hopes to prolong low prices to benefit their long-term needs for market share and higher demand.
→ Naked Capitalism
Historically, Saudi Arabia has played a stabilizing role in world oil prices, by adjusting its output to ensure global supply is stable. The above graph show how Saudi output increased to lower prices when they were high, and vice versa. However, since July, the Saudis have not responded to newly low oil prices by decreasing output. In fact, the Kingdom have insisted that they would rather bear lower oil prices than decrease their market share (read: be squeezed out by shale).
→ Stats Life
An alternative explanation for the oil glut is that technical change was initiated by profit-motivated private companies for whom a price decrease was not part of their intention. They may have had no intention to hurt producers and help consumers. Other producers followed the innovators and adopted the new technology. The resulting competitive process is an example of Creative Destruction that produced net gains for the world economy, while simultaneously harming incumbent producers. Adam Smith’s famous description of the motives of a businessman is applicable: “.. he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention”.