Does this administration continue to own the "success" of this market?

[NolaAuTiger 3,295]

4 hours ago, DKW 86 said:

Relying on algorithms is a bad business model. This has been blamed for sell-offs in the past. It should be far more closely monitored. But then again, the entire stock market should be far more highly regulated.

More times than not, it is simply a fail-safe. Fair enough? 

[maxwere 82]

17 hours ago, NolaAuTiger said:

In light of today's close, it appears that algorithmic trading caused the flash crash...

On Monday, the stock market did something weird. Sure, it was sinking through the day — but then, at about 4 p.m. ET, it plummeted. Nobody could figure out why. There was no big headline, no sudden announcement. 

“The drop in the morning was caused by humans, but the free-fall in the afternoon was caused by the machines,” wealth manager Walter “Bucky” Hellwig told Bloomberg. 

Hup — there it is. Algorithmic trading caused the flash crash. 

My “Midday Movers” producer asked me to offer an explainer for “algo trading,” as it’s nicknamed —but really, it’s not hard to grasp. Algo is when you program software to buy or sell stocks automatically, based on timing, price, quantity, or some mathematical model. 

Algorithmic trading has a number of benefits: It rules out human emotion; it places trades instantly and precisely, locking in at the values you want; and lets institutional investors (like mutual funds and insurance companies) buy or sell huge quantities of stock in many smaller blocks, so as not to affect the stock price in the process. 

Algo trading also, however, tends to magnify upward or downward trends, as we saw yesterday. Fortunately, the market largely recovered after the algo-driven selloff — maybe because humans came back to their desks.

IMO this is a sucker headline to help ease fears of the retail market.  I watched that whole move and there was nothing particularly unusual about it.  Algos do nothing more than (exponentially) increase the volume of bids in the market.  We know this because we can observe it in historic markets prior to algorithmic trading (simply adjust for volume).  Algos are designed to react based on violation of support and resistance.  In this case, fibonacci extension levels, since all recent structural support had broken through.  When recent structure is broken moves can be quite violent.  Funny business does occur, because institutional investors all understand how the game works and seek to arbitrage (this would be the case to some degree whether or not they had the benefit of trading automation).  Retail investors have no such advantage, so best advice is to stay away.

Short answer, in massive implied volatility move (downward without clear structural support), is hard to arrive at good price consensus (a tautological statement). 

[NolaAuTiger 3,295]

2 minutes ago, maxwere said:

IMO this is a sucker headline to help ease fears of the retail market.  I watched that whole move and there was nothing particularly unusual about it.  Algos do nothing more than (exponentially) increase the volume of bids in the market.  We know this because we can observe it in historic markets prior to algorithmic trading (simply adjust for volume).  Algos are designed to react based on violation of support and resistance.  In this case, fibonacci extension levels, since all recent structural support had broken through.  When recent structure is broken moves can be quite violent.  Funny business does occur, because institutional investors all understand how the game works and seek to arbitrage (this would be the case to some degree whether or not they had the benefit of trading automation).  Retail investors have no such advantage, so best advice is to stay away.

Short answer, in massive implied volatility move (downward without clear structural support), is hard to arrive at good price consensus (a tautological statement). 

Dozens upon dozens of explanations floating around, varying in degree of technicalities. Unfortunately, I lack the linguistic competence to offer a response of merit. The algorithmic post was copy and pasted - should have been reflected in the font size but wasn't. 

 

[maxwere 82]

4 hours ago, DKW 86 said:

Relying on algorithms is a bad business model. This has been blamed for sell-offs in the past. It should be far more closely monitored. But then again, the entire stock market should be far more highly regulated.

No, the problem is, DTCC has a government granted monopoly on clearing services.  Decentralize the process and allow it to scale with volume (ala blockchain).  Second, stop subsidizing margin rates will de-lever the whole system.  Dramatically, lower volatility.

Automation is good for business, but we still need to show up for work.

[maxwere 82]

3 minutes ago, NolaAuTiger said:

Dozens upon dozens of explanations floating around, varying in degree of technicalities. Unfortunately, I lack the linguistic competence to offer a response of merit. The algorithmic post was copy and pasted - should have been reflected in the font size but wasn't. 

 

My personal favorite: "the market is on SALE!  Act now!"  "all Bitcoin has got to go"

My basic principles:

• Technology is technology.  Trading automation is not fundamentally different than other types of automation.
• When fear arises, shift blame to something the public won't easily understand.
• If you are in a position of power and influence, its a good strategy to use public fear and ignorance to increase your own power
• Sentiment and exuberance drive equity prices.  If these wane look for a retest of market fundamentals.
• Retail investors will be the last to know.  Institutional investors look to re-position before it really gets bad.
• Follow the money.

Based on those, assume the headline is false until you can disprove it.  I'd say least reliable to most reliable analysis goes: DJT, Fed chairman, CNN news ticker, CNBC talking head, mainstream business website, contrarian blog (eg zero hedge), technical analysis of institutional capital flow.

[DKW 86 7,441]

Yes, but when it fails, it fails.

[Proud Tiger 4,261]

On 2/6/2018 at 11:33 AM, NolaAuTiger said:

Okay? Jimmy Carter spoke at an 11th grade level according to that very report. Sure did translate didn’t it?

4th grade level is better than some here display