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Dow 11,000 — Too Much Cheering

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  • Fri, May 07, 2010 - 03:37am

    #61
    Peak Prosperity Admin

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    Re: Wow!

[quote=machinehead]

The point remains, that liquidity can evaporate on electronic exchanges under duress, producing bizarre pricing. If I recall correctly, during the 1987 crash, an after-hours trade took place on Nikkei index futures in Singapore, implying a settlement price of below zero. In the antimatter shadow universe, stocks don’t make money — they cost you money!

[/quote]

<in homage to Yakov Smirnov> 

“In Soviet America, stocks trade you!”  Laughing

– Nick

  • Fri, May 07, 2010 - 07:19am

    #62
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    Re: Dow 11,000 — Too Much Cheering

[quote=Dogs_In_A_Pile]

I went through more than 6000 lines of trades on Time and Sales sheets today.  The programmed sell error story holds a lot of water.  Whistle outs overnight and tomorrow will confirm it.

But someone will come up with a spooky dark story I’m sure.

[/quote]

Dogs, I can’t BELIEVE you are missing the real story here!!!

It turns out a sex scandal broke out and caused the whole thing. Jeffrey Christian of CPM group has been found out as a terrorist spy, sent in by Al Queda terrorists working with central banks to disrupt the gold market. Christian and GATA’s Bill Murphy were gay lovers for years, and now Christian has been blackmailing GATA to take attention off the silver short by making bogus allegations about LBMA. But thanks to the work of Alex Jones, the cover has been lifted and exposed. Expect a full expose on King World News this weekend…

Hey, you asked for something dark and spooky… 🙂

As for whistle-outs, there’s zero change of the S&P futures trades being voided. How do I know? Because if that happened, I’d save a huge trading loss. Trades are only voided in Goldman’s favor, never in mine. I think it’s an exchange rule or something…

Erik

 

  • Fri, May 07, 2010 - 11:53am

    #63
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    Re: Wow!

[quote=Dogs_In_A_Pile]

MH –

Not sure what to make of it – there were a $hit load of 100 share trades on the THRD and NMS exchanges from 14:30 through after hours.

The low trades on T&S were around $69 and in 100 share blocks.  It started fading from $84 at around 14:30 and started lifting of $70 around 14:46.

If there was a huge trade that came as a limit order below the bid, the market maker doesn’t have to show it on T&S – only that a trade occurred at that level.  It lifted from ~$72 around 14:46 back to ~$83 by 14:58 and floated into the close settling around $84.

Here’s where it gets interesting – At 16:48:51, the THRD lights up at $73.25 and there are literally pages upon pages of 100 block trades going through – all at $73.25.  There are close to 2000 trades executed in 6 seconds.  Then at 16:48:57 the THRD jumps to $84.24 and about 300 trades go through.  After that, most of the trades originate from the NMS exchange and are the standard Best Bid/Best Ask sell and buy drill – again, all around $83-$84.

Rumors are flying that it was a P&G trade that started the landslide.  Their T&S looks just like 3M, except the low trade came in on the NMS exchange at ~$39 at the same time the THRD was executing at $60 – all right around 14:47:15.  By 14:48:11 it had recovered to ~$60. 

I’d like to know who pocketed the $11 spread on the 3M trades from 16:48:51 to 16:48:57.

It still looks like classic programmed sell/buy response to an external price stressor to me.  In other words, when all is said and done, the market was down 350 today – NOT 1000.

It will be interesting to see if any of these trades get whistled out overnight.   

[/quote]

I support your dig through the data!

However, I might note a couple of things here…

  1. The market was sliding all day but really only picked up steam (with respect to price and volume) for three 5-minute bars starting with the 1:35 pm bar which is well before some of your T&S data.
  2. There was some accelleration in volume for the last two red bars but the really big volume was for the nipple bottom candle and the next greenie during the ride back up.  The volume wasn’t on the downside, but the upside.
  3. Where you note 2,000 trades of 100 blocks as representing a lot I might note that this is only 200,000 shares which, in the scheme of things, is not enormous volume.

What I take from this is that for some reason the bids got pulled and it wasn’t super high volume killing the market.  Next I’ll note that the enormous volume showing up during the instant bounce represents far more than a simple unwinding of the prior trades.  A huge amount of liquidity came roaring in.

Where you seem to have already determined that this only represented the normal workings of a free and open market system I am not yet convinced that we have enough forensic evidence to make any determinations about what happened or where all that market support came from.

I remain open to the possibility that this truly represents the normal workings of finely tuned algorithms playing the circuit breaker angle but also something else like an official rescue operation.  I simply don’t have the evidence to really say anything one way or the other.

Except I can say that yesterday was highly unusual and I do have enough evidence to call B.S. on many of the so-called explanations circulating out there like the idea that traders at Citi use text, not numerals, to enter trades.

More data!  We need more data!!

  • Fri, May 07, 2010 - 12:57pm

    #64
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    Re: Dow 11,000 — Too Much Cheering

[quote=Erik T.]

[quote=Dogs_In_A_Pile]

I went through more than 6000 lines of trades on Time and Sales sheets today.  The programmed sell error story holds a lot of water.  Whistle outs overnight and tomorrow will confirm it.

But someone will come up with a spooky dark story I’m sure.

[/quote]

Dogs, I can’t BELIEVE you are missing the real story here!!!

It turns out a sex scandal broke out and caused the whole thing. Jeffrey Christian of CPM group has been found out as a terrorist spy, sent in by Al Queda terrorists working with central banks to disrupt the gold market. Christian and GATA’s Bill Murphy were gay lovers for years, and now Christian has been blackmailing GATA to take attention off the silver short by making bogus allegations about LBMA. But thanks to the work of Alex Jones, the cover has been lifted and exposed. Expect a full expose on King World News this weekend…

Hey, you asked for something dark and spooky… 🙂

As for whistle-outs, there’s zero change of the S&P futures trades being voided. How do I know? Because if that happened, I’d save a huge trading loss. Trades are only voided in Goldman’s favor, never in mine. I think it’s an exchange rule or something…

Erik

[/quote]

Well if this is the lead story on Access Hollywood and TMZ I do believe you have e nailed this one down!!  Laughing

 

All kidding aside, the early initial explanations sort of made sense last night going through the T&S sheets.  This morning however, there seem to be a lot of “Holy $hit” and “WTF” expressions on the faces of people one would expect to have more answers than questions from.

Chris makes a very good point in his post from a volume disconnect angle but I think there is more to it and he’s right (as always Cool) –  more data is needed.  The unsettling thing about all the buzz today is the very real possibility that no one really knows the reason for the (apparent) lack of liquidity.  Just looking over T&S, I can almost buy the market to market disconnect explanation – automated trading will do what automated trading is supposed to do in that case – but what we really need to know is what caused the liquidity loss.  If in fact that is the root cause.

I just can’t unravel the huge block of P&G and 3M trades from the THRD exchange that were 20% – 30% off the trades from the NMS.

You could almost come to the conclusion that some bubba at THRD and some bubba at NMS are now on a jet to St Maarten?

  • Fri, May 07, 2010 - 01:13pm

    #65
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    Re: Dow 11,000 — Too Much Cheering

Dogs!  I am shocked and appalled that you would suggest that the market – free as it is – is possibly being illicitly manipulated!!  Shocked I say!

  • Fri, May 07, 2010 - 01:21pm

    #66
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    Re: Wow!

[quote=cmartenson]

[quote=Dogs_In_A_Pile]

MH –

Not sure what to make of it – there were a $hit load of 100 share trades on the THRD and NMS exchanges from 14:30 through after hours.

The low trades on T&S were around $69 and in 100 share blocks.  It started fading from $84 at around 14:30 and started lifting of $70 around 14:46.

If there was a huge trade that came as a limit order below the bid, the market maker doesn’t have to show it on T&S – only that a trade occurred at that level.  It lifted from ~$72 around 14:46 back to ~$83 by 14:58 and floated into the close settling around $84.

Here’s where it gets interesting – At 16:48:51, the THRD lights up at $73.25 and there are literally pages upon pages of 100 block trades going through – all at $73.25.  There are close to 2000 trades executed in 6 seconds.  Then at 16:48:57 the THRD jumps to $84.24 and about 300 trades go through.  After that, most of the trades originate from the NMS exchange and are the standard Best Bid/Best Ask sell and buy drill – again, all around $83-$84.

Rumors are flying that it was a P&G trade that started the landslide.  Their T&S looks just like 3M, except the low trade came in on the NMS exchange at ~$39 at the same time the THRD was executing at $60 – all right around 14:47:15.  By 14:48:11 it had recovered to ~$60. 

I’d like to know who pocketed the $11 spread on the 3M trades from 16:48:51 to 16:48:57.

It still looks like classic programmed sell/buy response to an external price stressor to me.  In other words, when all is said and done, the market was down 350 today – NOT 1000.

It will be interesting to see if any of these trades get whistled out overnight.   

[/quote]

I support your dig through the data!

However, I might note a couple of things here…

  1. The market was sliding all day but really only picked up steam (with respect to price and volume) for three 5-minute bars starting with the 1:35 pm bar which is well before some of your T&S data.
  2. There was some accelleration in volume for the last two red bars but the really big volume was for the nipple bottom candle and the next greenie during the ride back up.  The volume wasn’t on the downside, but the upside.
  3. Where you note 2,000 trades of 100 blocks as representing a lot I might note that this is only 200,000 shares which, in the scheme of things, is not enormous volume.

What I take from this is that for some reason the bids got pulled and it wasn’t super high volume killing the market.  Next I’ll note that the enormous volume showing up during the instant bounce represents far more than a simple unwinding of the prior trades.  A huge amount of liquidity came roaring in.

Where you seem to have already determined that this only represented the normal workings of a free and open market system I am not yet convinced that we have enough forensic evidence to make any determinations about what happened or where all that market support came from.

I remain open to the possibility that this truly represents the normal workings of finely tuned algorithms playing the circuit breaker angle but also something else like an official rescue operation.  I simply don’t have the evidence to really say anything one way or the other.

Except I can say that yesterday was highly unusual and I do have enough evidence to call B.S. on many of the so-called explanations circulating out there like the idea that traders at Citi use text, not numerals, to enter trades.

More data!  We need more data!!

[/quote]

Morning Chris –

Even looking at Volume At Price (VAP) charts only further muddies the water.  The vast majority of 3M’s VAP rolled up by the time the price dropped from $86 to $82.  There was very little relative VAP during the fall to $69.

Pretty much the same chart for PG except one of their VAP lines runs all the way across the chart!

Absent any other explanation, you could conclude that some consortium of schmucks dumped a load of PG and 3M forcing the drop so they could bottom feed off the dip.  Except there is no volume at the low trade price.

If I could figure out how to hang a picture of the PG and 3M VAP 1 minute chart I would – even that is cumbersome since most of the volume of 3M’s ride happened over a span of about 6 seconds.

I’ll keep digging

It looks like Erik’s explanation is as good as anything else floating around right now.  And I am quite certain I don’t want to examine any of that data.

 

  • Fri, May 07, 2010 - 01:29pm

    #67
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    Re: Dow 11,000 — Too Much Cheering

[quote=land2341]

Dogs!  I am shocked and appalled that you would suggest that the market – free as it is – is possibly being illicitly manipulated!!  Shocked I say!

[/quote]

I totally deserve that Cool

 

Now I have to try and get coffee out of my keyboard.

  • Fri, May 07, 2010 - 03:04pm

    #68
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    Re: Dow 11,000 — Too Much Cheering

I think the bottm line here is that the world economic situation is very fragile – the weight of government debt is crushing confidence and any shock to the system is likely to be magnified in ways expected, or unexpected. Unrest is simmering in Europe – just like the restless volcano in Iceland that is again spewing ash and causing trouble for trans-atlantic flights. A new, larger eruption could come at any time – or activity could quiet down – but people are nervous – uncertainty is everywhere.

There is a series of classic headlines on the AP wire feed this morning:

first

“US job figures shore up world markets”

then

“US job figures fail to shore up world markets”

and finally

“World markets plunge despite strong US jobs data”

(Lets look at SaxPlayers just posted update to see that encouraging jobs data – oops, everything but the government sector is in the toilet – never mind)

The future is always uncertain – fact of life – but the awareness of just how uncertain the behavior of complex systems that are under stress can be has somehow made its way into the conciousness of the investment community it would seem. Yet the fact that the piper must be paid, in the end, is still too scary to face.

 

  • Fri, May 07, 2010 - 03:17pm

    #69
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    Re: Wow!

[quote=Dogs_In_A_Pile]

Morning Chris –

Even looking at Volume At Price (VAP) charts only further muddies the water.  The vast majority of 3M’s VAP rolled up by the time the price dropped from $86 to $82.  There was very little relative VAP during the fall to $69.

Pretty much the same chart for PG except one of their VAP lines runs all the way across the chart!

Absent any other explanation, you could conclude that some consortium of schmucks dumped a load of PG and 3M forcing the drop so they could bottom feed off the dip.  Except there is no volume at the low trade price.

If I could figure out how to hang a picture of the PG and 3M VAP 1 minute chart I would – even that is cumbersome since most of the volume of 3M’s ride happened over a span of about 6 seconds.

I’ll keep digging

It looks like Erik’s explanation is as good as anything else floating around right now.  And I am quite certain I don’t want to examine any of that data.

[/quote]

Right, I agree that for some reason the bids absolutely dried up.  That’s the story.

So what can cause bids to dry up like that?  In time past, with specialists and lots of little investors making up the bulk of the market, that could never really happen.  But with HFT computers operating at the end of a low volume 80% run up in the stock market?  I guess our new learning is that all the bids can evaporate and therefore the market is an even more dangerous place than it used to be.

 

  • Fri, May 07, 2010 - 03:55pm

    #70
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    Re: Dow 11,000 — Too Much Cheering

Right, I agree that for some reason the bids absolutely dried up.  That’s the story.

So what can cause bids to dry up like that?  In time past, with specialists and lots of little investors making up the bulk of the market, that could never really happen.  But with HFT computers operating at the end of a low volume 80% run up in the stock market?  I guess our new learning is that all the bids can evaporate and therefore the market is an even more dangerous place than it used to be.

Another way to put this is that without HFT, the volume in the markets during the huge run up from the lows would be less than half of what people thought.  What this means is that there were no real bids – or offers – for a long long time now.  The masses are still shell shocked after the free fall last March…and the game became very very quiet.

Now, when the only people other than the government via banks who are trading (HFT) decide risk is too great and leave, that leaves no bids.

While yesterday was a disaster of sorts, lets all remember that we didnt even break 6 month lows!  HFT is not the culprit – no one is required to put in bids.  The market is more dangerous now because its faster and filled with government intervention that makes prices artificially high.

Here is a link to the best article I have read regarding the causes of the fall yesterday:  http://globaleconomicanalysis.blogspot.com/2010/05/equity-plunge-yen-connection.html

 

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