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A Perfectly Stable Market? 18,209 "Mini Crashes" In The Past 5 Years Claim Otherwise

Tyler Durden's picture




 

There was a time when the SEC at least tried to pretend the market is safe and efficient for investors. That was before Reg NMS, ATS and who knows what other mandated changes to market structure made a once stable marketplace into a labyrinth of fragmented sub-markets, exchanges, ATS, OTC venues and dark pools, where flash crashes, sub-pennying, HFT scalper algos, feedback loop generating synthetic CDOs aka ETFs, bank internalization and rampant outright fraud made the market into a sad and pale imitation of what it used to be. Of all this, May 6 was merely the culminating point. It is no wonder that since the first of many Flash Crashes investors have pulled money in 29 consecutive weeks: the message is all too clear - the retail participant has left the building...and the market. And to put the final nail in the coffin of investor confidence, we present the following detailed analysis from Nanex, which proves that in the past 5 years trading is nothing short of a travesty. The market analysis firm has conducted the definitive exchaustive analysis of "mini crashes" and has found a whopping 18,209 events of either mini melt downs ot melt ups. We hope Mary Schapiro reads this report and provides us with a refutation of either the analysis or the conclusion. We will gladly provide her the venue she so desperately needs to address an infinitely skeptical public that she has anything under control at this point.

From Nanex:

We have analyzed all listed equities for 2006, 2007, 2008, 2009 and 2010 for
potential "mini crashes" in individual stocks. We were surprised at
the number of incidents we found.

Parameters used:

  1. To qualify as a down-draft candidate, the stock had to tick down at least
    10 times before ticking up -- all within 1.5 seconds and the price change had
    to exceed 0.8%.
  2. To qualify as a up-draft candidate, the stock had to tick up at least 10
    times before ticking down -- all within 1.5 seconds and the price change had to
    exceed 0.8%.

Because there are so many of these instances, showing all the individual charts on a page would simply be to unwieldy. Instead, we are providing ZIP archives for each year analyzed. Simply download the files, unzip and start viewing. We also made 10 pages with 10 sample images from each year (both down drafts and up drafts) for you to view now.




Year

Count
Down
Drafts

Download All

Examples
 
Count
Up
Drafts

Download All

Examples
2010 909 Download
View
  672 Download
View
2009 1,462 Download View   1,253 Download
View
2008 4,065 Download View   4,354 Download
View
2007 2,576 Download View   2,456 Download
View
2006 254 Download View   208 Download
View


An explanation of the chart components can be found by
Clicking Here

The chart that in any other country would send Schapiro and her cronies packing is presented below: it shows the daily occurrence of these mini crash events between January 1, 2006 and Noember 3, 2010.

The chart above is probably far more important than any stock chart one can conjure. After all why bother: it is clear that mark to market is currently fatally flawed, courtesy of lack of regulation, FASB co-option, and governmental and Fed involvement.

In short - stocks are noise.

And for the forensic detectives, here is the one event that probably sealed the fate of the market:

Reg NMS:

Regulation NMS was implemented in 2007. For an exact timeline of the
implementation phases, please see:

SIFMA
Regulation NMS Implementation Timeline.

Many exchanges had completed implementation prior to the required dates.
Consider the NYSE Hybrid Market rollout:

Hybrid Phase III - COMPLETED rollout January 24, 2007
Hybrid Phase IV - COMPLETED rollout February 27, 2007

Note that prior to Feb 2007, the NYSE had never been a reporting exchange in
any incident.

Now, all the NYSE cares about is how to get the latest Chinese IPO scam off on its exchange as promptly as possible to collect a few dollars and postpone its inevitable implosion now that in its stupidity it made itself (and the SEC) obsolete.

 

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Tue, 11/30/2010 - 18:24 | 766003 truont
truont's picture

Waddell & Reed Strike Back!

Tue, 11/30/2010 - 18:32 | 766022 High Plains Drifter
High Plains Drifter's picture

Its nice to see the President of the Zerohedge Fan Club , Barry, "two chins"  Rithholtz on Fast Money today.

Tue, 11/30/2010 - 18:31 | 766024 Rainman
Rainman's picture

EZ to splain....18,209 fat fuckin' fingers.

Tue, 11/30/2010 - 19:50 | 766312 Hard1
Hard1's picture

Off course!!! it's an obesity problem, not a market thing

Tue, 11/30/2010 - 18:39 | 766049 unwashedmass
unwashedmass's picture

 

First thing Mary will do is call Waddell and tell them to STOP IT!!!!

or she's going to be angry.....and threaten to write you a letter......and stamp her feet!

Tue, 11/30/2010 - 18:42 | 766057 max2205
max2205's picture

I got stopped out on some of these. Where Are those class action lawyers?

Tue, 11/30/2010 - 18:59 | 766117 ForWhomTheTollBuilds
ForWhomTheTollBuilds's picture

The class action suit will come one day.  The lawyers will take all the cash and you will be compensated with 3 free trades

Tue, 11/30/2010 - 18:45 | 766066 Gubbmint Cheese
Gubbmint Cheese's picture

pretty simple - the chart above simply shows that there was a medium sized earthquake in San Fran at approx 1:25pm...

 

lol

Tue, 11/30/2010 - 18:55 | 766097 trav7777
trav7777's picture

safe?  LOL

I have trader friends who I've been trading in collaboration with for a few years now who say that online sports gambling on NFL teams is safer than this shit.

the ONLY way it appears to make winning trades in this market is to B&H yield plays in energy and pipelines or to go long the absolute worst, most counterintuitive stocks that you could think of.

Tue, 11/30/2010 - 18:59 | 766118 BaboonAss
BaboonAss's picture

I would like to believe that some of the folks over at the SEC do read ZH and are familiar with the work of Nanex (tranny porn site addict SEC employees excluded, of course).

I would also like to believe that some of them actually believe in the stated mission of their organization: "The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation."

So please, Lord, tell me that some of them are saying to themselves, "Yeah, we know shit is really fucked up right now, but we can't really say that on the record because then we will have a complete once-in-a-thousand years collapse. We know in our heart of hearts that free, fair, and open markets, that favor no one participant over any other are actually the core of the most free and fair economic system possible and what we have now has deviated horribly far from that course. So we have been working mightily behind the scenes with new regulations, processes and procedures that will be imposed on financial institutions and their stakeholders, and we have freshly signed indictments with teams of attorneys prosecution-ready. We just need a little more time, like a few more days."

That's what they're really saying, right?

Right?

 

Tue, 11/30/2010 - 21:22 | 766264 Cdad
Cdad's picture

Ummmm...probably not.  Currently, M. Shapiro is taking comments from the criminal syndicate known as Wall Street to better help her understand which SEC laws she should not enforce for fear that it would cut into said criminal syndicate's bonus pool.

I suspect M. Shapiro is much more concerned about protecting the rights of dark pools to manipulate that shit out of stocks prior to the opening bell...and after the closing bell...as can most clearly be seen on SPY tonight after hours where there is a SPY candle party going on that, probably, does not bode well for any sorry Average Joe who did any fundamental analysis last night before he purchased the instrument designed to match the performance of the S&P 500....LOL!  But who cares about him.

After all, and right now, the price action on TIF is very important for continued momentum on the NYSE, and ANN and JWN and such.

So you ought sit the fuck down, serf, and stop making porno jokes directed at people that are likely almost entirely incapable of working the interweb or the google machine.  They are busy taking comments right now.

'nough said.

Tue, 11/30/2010 - 19:07 | 766158 FatFingered
FatFingered's picture

Wow!  Good work.

Tue, 11/30/2010 - 22:52 | 766233 fuu
fuu's picture

Are we going to get a Q2 flash crash pdf in the future?

 

edit: sorry I asked that before checking out the downloads. Is it ok to animate these?

Tue, 11/30/2010 - 19:40 | 766273 RobotTrader
RobotTrader's picture

Funny how retail stocks are totally unfazed from:

- Flash crashes

- Imploding Europe

- China tightening

- Inflation vs. deflation debates

- Worst unemployment in a generation

- Collapsing housing market

One of the best performing sectors is women's clothing, like this one:

 

Enjoy the show...

 

 

 

Tue, 11/30/2010 - 19:51 | 766313 prophet
prophet's picture

Lingerie and handbags have a better return than that darn index hugging mutual fund I've been married to for too long.

Tue, 11/30/2010 - 19:43 | 766284 anonnn
anonnn's picture

TD pls explain acronyms in references heading, for readability.

E.g. FASB is elaborated, but the more arcane Reg NMS is not.

From Wiki:

Regulation National Market System is a regulation promulgated and described by the United States Securities and Exchange Commission (SEC) as "a series of initiatives designed to modernize and strengthen the national market system for equity securities." 

Tue, 11/30/2010 - 19:48 | 766304 prophet
prophet's picture

The retail participant is rebalancing.  They have been "overweight" US equities for years and that started to change after the turn of the century.  As noted in a prior post over 90% of net fund inflows in 2006 went into emerging markets.  The dislocations in the markets jars more people loose from their over allocation to US equities.

Outrageous behavior, outrage, outflow.       

Tue, 11/30/2010 - 19:54 | 766324 threefingerscam
threefingerscam's picture

Excellent work. By these regular traces in the charts, one can't miss there is something funny (fraudulent) going on. But maybe the SEC will wave it away with.....<sarc> the definition of normal is repeating something 18 thousand times </sarc>.

Blood sucking bedbugs leave traces and also really hard to get rid of.

 

Tue, 11/30/2010 - 20:12 | 766374 erik
erik's picture

Australian manufacturing index contracts for 3rd month in a row.  More evidence of losing the battle to de-value currency, as Aussie dollar was rampaging in Sept/Oct.

http://www.bloomberg.com/news/2010-11-30/australian-manufacturing-contracted-for-third-month-capacity-use-declines.html

Tue, 11/30/2010 - 20:57 | 766459 omi
omi's picture

You're basicly trying to approximate a VIX chart, VIX chart is prettier.

Tue, 11/30/2010 - 21:03 | 766472 erik
erik's picture

Chinese manufacturing PMI beat at 55.7 versus 54.8 expectations.

Wed, 12/01/2010 - 01:37 | 767094 NewThor
NewThor's picture

When the Global Economy follows demonic fundamentals, Nostradamus

is the best economist to follow. 

"To the great one of Ceramon-agora,
The crusaders will all be attached by rank,
The long-lasting Opium and Mandrake,
The "Raugon" will be released on the third of October."

century: 9, quatrain: 62

 

TARP-BAILOUT-FEDERAL RESERVE ALL POWERFUL = October 3rd, 2008

 

"The chief of London through the realm of America,
The Isle of Scotland will be tried by frost:
King and "Reb" will face an Antichrist so false,
That he will place them in the conflict all together."

century: 10, quatrain: 66

Frost = Credit Freeze. 

Nero in command.

global currency war 

----

Ladies and Gentlemen, I've given you all the pieces of the puzzle.

It is up to you to put it all together.

God Bless everyone.

Heaven Help us all.


 

Wed, 12/01/2010 - 05:58 | 767308 Diidier
Diidier's picture

There is a correlation between the first pangs of the subprime crisis and and surge of up and down movements (august 2007) and a correlation between the Lehman Brothers affairs and another surge in those (let's say it politely) curious movements (september 2008). This chart shows us vultures on the loose and it's "legal".

And I'm supposed to believe in the markets. I do prefer believing in Santa Claus, in Pellucidar or life on the moon. Those are much more credible.

Wed, 12/01/2010 - 10:10 | 767506 rcaldwell00
rcaldwell00's picture

This REG NMS...genius....Hey Duncan and Larry, Thanks this monstrosity you have created sucks

Wed, 12/01/2010 - 13:39 | 768520 bbaez
bbaez's picture

Is that the plunge protection team at work or manipulations by heavy weights

Heavy weights have to earn one way or another since they can not pump and dump or trash then cash anymore

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