Recap: Week Ending August 23, 2013
New MBA trading courses at the HIDC
New Undergraduate trading courses at the GTF
After seeing some of the lowest volumes in the S&P 500 and NASDAQ 100, stocks were able to bounce off what has been a drift to the downside to say the least. Minus the Dow Jones Industrial Average, which closed in the red, the S&P, NASDAQ and Russell 2000 all closed positive on the week. Other major equity indices closed positive or near unchanged on the week. The Toronto Stock Exchange sold off early in the week, however, following a significant push in gold Friday, closed higher on the week. The push higher late in the week was also seen in light crude; however, the move was not significant enough to close positive on the week. Following weeks of consolidation around the 1.035 the CAD lost strength vs. the USD pushing USD/CAD higher to 1.04926 on the week. The USD is roughly 1cent off of multi year highs against the CAD.
The big news on the street this week was the sudden shutdown of the NASDAQ stock exchange for over 3 hours Thursday following a technical glitch. The stoppage in trading appears to be caused by an overload of orders which could have been produced from high frequency trading, HTF. It appears the HTFs over loaded the data system which gathers information form electronic communication networks, ECNs, which then calculates the price. The NASDQ which lists over 3,000 equities that is based in New York, was the victim of what is now being called the flash freeze by many media outlets. The freeze shut down an estimated $16 billion dollars worth of transactions on the second largest stock exchange in the United States. Even though investors were not able to trade NASDAQ listed securities, they were able to hedge possible positions in the futures market. The Chicago Mercantile Exchange, CME, offers investors a futures contract for the delivery of the NASDAQ 100 index. During the halt, the futures contract was activity traded despite the underlying index not moving since none of its constitutions were active. Usually when an individual stock is halted the underlying options continue trading, however, in this situation all underlying options of NASDAQ listed securities stopped trading. When the news broke about the halt a small reaction to the downside was seen on the S&P500 and Dow Jones which continued to trade as regular. During the halt, these indexes actually rose in value, creating a situation for the NASDAQ to rise when reopened to catch up on any missed gains. It appears that this trading incident has put the spotlight on imposing tighter regulations on exchanges. The NASDAQ slowly reopened securities between 3:25 and 3:30 Thursday afternoon, the NASDAQ operated as usual Friday.
The news from the NASDAQ overshadowed news from the FOMC minutes which were released on Wednesday. Comments from the FOMC continue to be unclear, however, it is necessary to note that almost every member agrees that at this current time, changes in Quantities Easing is not justifiable. On that note, investors to continue to wait till September when it is believed that Ben Bernanke will formally address the situation which he has stated in prior minutes.
