Morning 1-29

Per WSJ “About 24 billion shares changed hands in the U.S. equities market on Wednesday, a record, data from Rosenblatt Securities show. Volume in the options market also hit a record of 59 million contracts, Trade Alert data show.

 Yesterday Robin hood had to draw down Credit lines for at least $1billion From CEO Vlad tenev “Look it is not Negotiable for us to comply with our financial requirements and clearing house deposits” “We have to do that”-BBG    After yesterdays Forced liquidation or statements of Closing positions trades and outrage from Everyone from ted Cruz to AOC Robinhood allowing two sided trades in GameStop and other high Fliers, as are other Firms GameStop +100%  ,$150.

 Now GameStop went from the least weighted stocks in the Russell 2000 to the top of the list thus causing all sort of issues with Basket trades or ratio trades with Russell as one leg. This likely caused Funds to buy and sell GameStop and buy and sell Russell From Jack Farley at Real vision “always great stuff.

   “Briefly today, it was the biggest stock in the index. It went from about 0.02 as of a few months ago to 0.5%. As GameStop commanded a bigger and bigger presence within the index, it forced passive funds like BlackRock to buy more, because if GameStop increases in price, and you do not buy more, and you just have the Russell 2000, effectively your net short, GameStop. That is something that we have learned, you do not want to do. What do these three forces have in common? Forced buying. The short sellers had to buy back their stock in order to cover their short position, the market makers in the options markets, they had to buy the underlying GME in order to hedge their delta as the price went up, and then as the price went up, they had to hedge it more and more exponentially. Then third, and this is slightly more of a niche point, a less established fact, is that the indexes had to buy the stock back as it went up. What do these three forces have in common? Forced buying. What happened today? Forced selling, that is exactly what happened as accounts of retail traders were closed out as retail brokerages says, oh, we cannot handle the exposure anymore. It is too risky. The spreads are too wide. It is just too bad. We cannot do it. It is too risky. We are going from forced buying to force selling. I think that could be a harbinger of what is to come.”

  Other news less bad Eurozone

  • The German economy expanded 0.1% on quarter in Q4, beating market forecasts of a flat reading, and despite a coronavirus national lockdown imposed from mid-December.
  • The French GDP shrank 1.3 percent quarter-on-quarter in Q4 2020, compared with market consensus of a 4.0 percent fall and after a record growth of 18.5 percent in Q3, preliminary data showed.
·         Spain’s GDP grew by 0.4 percent on quarter in the three months to December 2020, following a record 16.4 percent advance in the previous period and compared to market expectations of a 1.5 percent contraction as the impact of tightening COVID-19 restrictions since November was less severe Trading Economics.
  • Bitcoin on the Bid as Elon Musk added #Bitcoin to His twitter page, Nothing else Futures +16%-BBG.
  • NOVAVAX SHARES UP 42.5% PREMARKET AFTER CO SAYS ITS COVID-19 VACCINE WAS 89.3% EFFECTIVE IN UK TRIAL-@deltaone
  • But bad news JnJ says 1 shot vaccine not as effective as 2 shot and less effective against new strains.
  • Johnson & Johnson says its one-dose Covid-19 vaccine has been 66% effective in global trials.
  • Also figuring into the mix, however, was a Bank of Japan announcement about cutting the size of shorter dated JGB purchases out to five years. Market participants are starting to wonder what is going on here following the Jiji Press story from last week suggesting the BoJ is considering widening the band for 10-year yields targeted under the Yield Curve Control program
  • Also figuring into the mix, however, was a Bank of Japan announcement about cutting the size of shorter dated JGB purchases out to five years. Market participants are starting to wonder what is going on here following the Jiji Press story from last week suggesting the BoJ is considering widening the band for 10-year yields targeted under the Yield Curve Control program

Markets:

 7:30 inflation Data from Canada and US (PCE core) running a bit hot Bonds on the offer buy commodities Stocks heavy   GameStop back trading +$100   sell the indices Gold and Silver Higher

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