Jun

22

Liquidity, from James Sogi

June 22, 2007 |

 Financial writers refer to liquidity. What is it? As of this writing on Friday afternoon at S&P September 1518, Globex cumulative depth shows around 3000 on each side with fewer than 1000 bids or offers at the various levels. Time and sales show orders of 1000 and more are fairly common and such an order might take out several levels.

Contrast this to 20,000 cumulative depth per side at market tops and trend days up. Right before the FOMC announcement liquidity dries up to lower amounts, which is followed on the announcement with large movements. The last few days have seen larger handles. Is it just the hot mid-summer and all the big traders are out in the Hamptons, or is something else at work?

Last night and tonight are midsummer nights following the solstice.

"More strange than true: I never may believe
These antique fables, nor these fairy toys.
Lovers and madmen have such seething brains,
Such shaping fantasies, that apprehend
More than cool reason ever comprehends."

From A Midsummer Night's Dream, William Shakespeare.


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