11.17.2011
By Markets Media

Sour Markets

11.17.2011 By Markets Media

Traders grimaced whilst their screens filled with red candles on Thursday as concerns over low volumes and liquidity accelerated.

U.S. equities started the day off lower, but then key technical levels broke which caused a massive selloff in the market. Traders broke a the key technical level of 1220 in the S&P 500 E-Mini futures followed by the bullish area of defense at 1218.This triggered sell stops down to 1207 and even further.

Commodity weakness continues despite the brief rally in crude oil, which launched it over $100 a barrel. “Gold weakness coupled with crude weakness, euro weakness and a strong dollar was too much for the camel’s back to hold,” said one New York-based proprietary trader. “The market is broken.”

And despite it being weeks since the collapse of MF Global, regulators, exchange officials and traders have expressed concern over where missing customer money has gone. The debacle has eroded customer trust in some broker-dealers and as a result, some have begun to withdrawal their monies from the market.

Ann Barnhardt of Barnhardt Capital Management, a hedge fund focused on commodity-based strategies, released a letter on Thursday saying that she was shutting the fund down because of market volatility and a lack of trust in the markets.

Perhaps the most damning excerpt from the letter was the following: “The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity.”

Strong words. The S&P 500 finished the day at 1216 – down 20 points.

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