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It appears every bulge bracket firm is forecasting considerable volatility in the coming weeks.  Is this the result of the lack of volatility of the last sixty days, the least volatile times in about 20 years according to some statistics?

The potential causes for this predicted volatility….earnings, monetary policy, politics, etc.  In other words, the typical factors that are always present.

I am a firm believer in the phrase “It is not different this time, there are just different people.”  However perhaps today is different given the massive proliferation of ETFs and cross correlated algorithmic trading where everyone owns the same few stocks.  As commented many times, when selling commences who is left to buy?  No one.

Is this basis of the bulge bracket firms’ forecasts?  Perhaps.

Monday was the slowest trading day of the year.  Yesterday was the second.  In other words, there is little conviction to do anything.   But I can write the anemic volume is the result of lack of volatility, volatility required for the algorithmic trading firms that trade upon ranges and moving average line?  All must remember that according to the NYSE 89% of its volume is the result of these trading firms.

As noted many times, this is not investing but rather a disguised form of potential manipulation that adds no capital to the capital stock of the economy.  In my view, such trading does not increase liquidity, a tenant that many elitists/academics champion as positive virtue of this trading strategy.

Will today be yet another quiet day?  Averages are poised to register their first monthly decline since February.  How will the ADP Private Sector Employment survey influence the sentiment for Friday’s BLS report?

Last night the foreign markets were mixed.  London was down 0.14%, Paris up 0.58%,  and Frankfurt down 0.08%.  China was up 0.35%,  Japan up 0.97% and Hang Sang down 0.17%.

The Dow should open little changed ahead of the ADP data.    The 10-year is off 3/32 to yield 1.58%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.