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Stock Flare Up Provides Early Decoupling Opportunity

Tyler Durden's picture





 

Stocks are once again doing their own thing, detached not only from credit, but also from FX. The early ramps in stocks on little volume which is the HFT Monday morning pattern we have all grown to love and expect, saw no validation in either bond spreads or the carry trade. In fact, stocks have decoupled from the AUDJPY by as much as 8 points early on. As usual, there is nothing in the factual arena to validate this kind of move. Incidentally, there is now scientific evidence that validates the fact that HFTs distort markets. We will post on it shortly, although anyone who have been trading stocks over the past year is more than aware of this.

 


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Mon, 07/12/2010 - 10:22 | Link to Comment Pamela Anderson
Pamela Anderson's picture

Playboy shares are having an erection!!! (sorry I couldn't resist..)

http://finance.yahoo.com/q/bc?s=PLA&t=5d&l=off&z=l&q=l&c=

Mon, 07/12/2010 - 18:23 | Link to Comment Eric Cartman
Eric Cartman's picture

LOL! 

Mon, 07/12/2010 - 10:26 | Link to Comment ratava
ratava's picture

what scientific evidence when all the scientists are paid for with money printed by their financial innovation voodoo and then sold to fed for 100 cents on dollar

Mon, 07/12/2010 - 10:28 | Link to Comment firstdivision
firstdivision's picture

Que?

Mon, 07/12/2010 - 10:30 | Link to Comment ratava
ratava's picture

reply no edit

Mon, 07/12/2010 - 10:26 | Link to Comment firstdivision
firstdivision's picture

Was watching this decouple begin to unfold this morning.  It was a rather irrational movement in the ES but then saw the AUDJPY try to catch up.  Recoupling in t-minus 4.5 hrs.

Mon, 07/12/2010 - 10:38 | Link to Comment -1Delta
-1Delta's picture

the CADJPY as well

Mon, 07/12/2010 - 11:27 | Link to Comment mephisto
mephisto's picture

Typical monday morning pump and dump. If the street gets a sniff that funds have cash to invest, if orders are coming in pre-open, then they spike the futures, your 401k buys at 1075, and suddenly we are back to 1069.

A nice spike on the friday night means your fund gets in at the close of Friday. The fact that futures collapsed after the cash close is something they never see. Client is happy, street is happy.

Mon, 07/12/2010 - 10:27 | Link to Comment Whizbang
Whizbang's picture

Looks like the correlations are broke again. Anything can happen today.

Mon, 07/12/2010 - 10:28 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

".....although anyone who have been trading stocks over the past year is more than aware of this........the fact that HFTs distort markets..."

More than anything else, this disturbs me because the longer something out-of-the-ordinary continues, the more likely it will be perceived as ordinary. More and more people line up on one side of the ship expecting it to stay upright. Suddenly a lurch down panics the crowd and everyone runs to the other side, which is the actual event that capsizes the ship as it reacts to the sudden shift of top side balance.

The very process that the Ponzi uses to inject "stability" into the market will destabilize it and send it to the bottom.

Mon, 07/12/2010 - 10:41 | Link to Comment Scooby Dooby Doo
Scooby Dooby Doo's picture

It's not going to change brother. The Reston 6 uses algorithmic trading to support the market in times of chaos.

They foresee future market activity by analyzing order data that flows to the exchange servers and they place their "calming" orders as a result of the algorithmic determination.

If you make algo trading illegal you're making the PPT illegal.

Mon, 07/12/2010 - 11:13 | Link to Comment SheepDog-One
SheepDog-One's picture

Right, they see all thru analyzing order data and such in .02 millisecond, nevermind those 1,000 point flash crash days but other than that yes the Whore St Oracle sees all.

Mon, 07/12/2010 - 10:42 | Link to Comment Whizbang
Whizbang's picture

It is "ordinary" now. The only people who are interested in banning HFT are some traders, and a few financially savy attorneys. Not many people around the world are interested in putting time into learning about it, and wouldn't understand even if they did. It's basically impossible to pay attention when they are constantly bombarded by advertizing and misinformation from every possible and angle, even their phones and (soon to be) license plates.

Mon, 07/12/2010 - 10:53 | Link to Comment Bearster
Bearster's picture

Don't get so caught up in your vision that you're sniffing your own farts.  I browse a fair number of financial sites, and I'd have to say that the vast majority of articles and comments want new regulations to ban HFT.

To which my reply is always the same: after how many failures of regulation, and how massive they are, will people begin to question the regulatory state?

I also ask if PPT manipulation was slower, would it be any better?  The problem isn't the speed of trading (and I cannot even imagine how you would go about setting speed limits on people's computers, or worse yet prohibiting the use of computers!), the problem is ZIRP.  Too much "liquidity" is being "pumped" in to the "system".  Translation: banks can borrow at zero and then they buy treasurys and equities to make a profit on the spread.  You cannot keep this, and somehow regulate the bad consequences from happening!

Mon, 07/12/2010 - 11:24 | Link to Comment Cheyenne
Cheyenne's picture

after how many failures of regulation, and how massive they are, will people begin to question the regulatory state?

No shit. Sites like this and KD expose this stuff all the time, including Uncle Warren's completely illegal move out of MCO, by way of one example among hundreds.

But try explaining regulatory capture to J6P. It's a complete disconnect: SEC = government = rules = enforcement = fairness. Martha Stewart and Mark Cuban are not accidents. Celebrity worship in the U.S. dwarfs crystal meth in both scope and toxicity.

Mon, 07/12/2010 - 11:56 | Link to Comment MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

 It's a complete disconnect: SEC = government = rules = enforcement = fairness. Martha Stewart and Mark Cuban are not accidents. Celebrity worship in the U.S. dwarfs crystal meth in both scope and toxicity.

+1000

What a mouthful...You're on fire!

Mon, 07/12/2010 - 11:47 | Link to Comment Whizbang
Whizbang's picture

I don't care about the "PPT", I don't care about regulation. I care about the fact that the markets are gamed by major players who constantly cheat and steal. The fact that market makers, are privy to information that we are not, are running the markets with Teraflop computing power and sub-micro data speeds makes a safe and sane investment strategy impossible. Trading has become the financial equivalent of a game of frogger where you jump out into the street, pick up a dime, and jump back out before you get nailed by a semi. I hope the financial sites you browse reflect the fact there is a blindness to this on capitol hill as well. Grayson is one of the only ones that I am aware who of is opposed to it, and he doesn't care enough to lose campaign contributions from banks and traders. It will never be banned.

Mon, 07/12/2010 - 10:49 | Link to Comment LeBalance
LeBalance's picture

Then what small sector of behavioral sub-space do we inhabit, with our language programming, social mores, historical misunderstanding, and on top of that our multi-dimensional multi-layered economic maze?

A pretty interesting Event Horizon set of circumstances that we as fish in the fishbowl can not completely perceive, but maybe we can appreciate the construct.

One little tweak and instant madness.  And no clue as to cause.  Much rationalization that is pointless, just enjoy the melody and the dancing.

...and I think it helps to be a bit unglued at this point.  So when the ship rocks you don't feel that the physics of loosing "everything of value" must include an emotional response.  Just laugh.

Mon, 07/12/2010 - 10:36 | Link to Comment bada boom
bada boom's picture

The witch doctors are at work again.

Mon, 07/12/2010 - 10:56 | Link to Comment Implicit simplicit
Implicit simplicit's picture

Spy of newt

 toil and trouble

 fed algos

 create the next bubble

Mon, 07/12/2010 - 10:47 | Link to Comment John McCloy
John McCloy's picture

  I am curious how this current "run" compares in volume to the previous runs. I feel like I say this every single week but the volume declines weekly and I am still amazed.. Days on low volume up erased in 25 minutes of actual selling yet people continue to step into the game.

Mon, 07/12/2010 - 10:47 | Link to Comment surferexx
surferexx's picture

tight range until 3:30 today or immediate drop following EU market closings?

Mon, 07/12/2010 - 10:53 | Link to Comment amarshall
amarshall's picture

I cared for about 10 minutes this morning, then I decided to play farmville on Facebook.

Mon, 07/12/2010 - 10:57 | Link to Comment Rick64
Rick64's picture

Here is Denninger showing proof of front running orders. Not really a Denninger supporter but it seems like valid proof.

 

http://www.youtube.com/watch?v=xOr5suFJ6-k

Mon, 07/12/2010 - 11:26 | Link to Comment -1Delta
-1Delta's picture

Saw the same,not a Denninger supporter, but interesting to say the least...

Mon, 07/12/2010 - 11:39 | Link to Comment Scooby Dooby Doo
Scooby Dooby Doo's picture

Objective: Engineering a new class of buy-and-hold investors while eating the daytraders lunch every day.

Why complain? Start here:

http://www.orangecap.net

http://sourceforge.net/projects/algotrade

http://quantlib.org/index.shtml

Mon, 07/12/2010 - 11:00 | Link to Comment Oso
Mon, 07/12/2010 - 13:43 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

A quote.

"We can't grow our way out of this," [Erskine] Bowles said. "We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can't tax our way out. . . . The reality is we've got to do exactly what you all do every day as governors. We've got to cut spending or increase revenues or do some combination of that."

Mon, 07/12/2010 - 11:12 | Link to Comment Muir
Muir's picture

11:10 EST

 "by as much as 8 points early on"

Very impressive Tyler, very.

Mon, 07/12/2010 - 11:28 | Link to Comment -1Delta
-1Delta's picture

it was 16 on the CADJPY and still stands at 8 points on the CADJPY carry....

Thu, 08/19/2010 - 10:57 | Link to Comment herry
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