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The Story Of The Berserk Nat Gas Algo Just Got Really Strange
We have already posted two articles on the case of the berserk "fractal" nat gas algo which caused a mini swoon in Nymex gas (NG) prices last night, preceded by some very abnormal trading patterns (discussed here and here). However, per additional observations on what happened, courtesy of Nanex, this very odd case is about to take a very disturbing detour into the downright surreal. Per Nanex: "It's almost as if someone is executing a new algorithm that has it's buying/selling signals crossed." In other words, either an HFT firm has hired some intern to code their algorithms without having even the faintest understanding of finance and economics (possible but unlikely), or as we have long speculated, we have now officially entered a bizarro market... though much more than just sarcasm: this is now a market in which buy and sell signals are confirmed to have been flipped. Nanex' conclusion is spot on: "Most disturbing to us is the high volume violent sell off that affects not only the natural gas market, but all the other trading instruments affected by it." Translated: the entire market now trades on flipped signals.
From Nanex:
The following charts show trade, trade volume, and depth of book prices and relative sizes for the July 2011 Natural Gas futures trading on NYMEX. Depth of book data is color coded by color of the rainbow (ROYGBIV), with red representing high bid/ask size and violet representing low bid/ask size. In this way, we can easily see changes in size to the depth of the trading book for this contract.
Depth of book is 10 levels of bid prices and 10 levels of ask prices. The bid levels start with the best (highest) bid, and drop in price 10 levels. Ask levels start with the best (lowest) ask, and increase in price 10 levels. The different in price between levels is not always the same. It depends on traders submitting bids and offers. In other words, depth of book shows the 10 best bid prices, and 10 best ask prices.
In a normal market, prices move lower when the number of contracts at the top level bid are executed. The next highest bid level then becomes the top level, and the 3rd level becomes the second and so forth. A new level is then added below the previous lowest level. On our our depth charts display, you would see this behavior as a change in color of the top level bid from the red end of the spectrum towards the violet end.
On June 8, 2011, starting at 19:39 Eastern Time, trade prices began oscillating almost harmonically along with the depth of book. However, prices rose as bid were executed, and prices declined when offers were executed -- the exact opposite of a market based on supply and demand. Notice that when the prices go up, the color on the ask side remains mostly unchanged, but the color on the bid side goes from red to violet. When prices go down, the color on the bid side remains mostly unchanged, but the color on the ask side goes from red to violet. This is highly unusual.
Upon closer inspection, we find that price oscillates from low to high when trades are executing against the highest bid price level. After reaching a peak, prices then move down as trades execute against the highest ask price level. This is completely opposite of normal market behavior.
The amplitude (difference between the highest price and lowest price) of each oscillation slowly increases, until a final violent downward swing on high volume. There also appears to be 3 groups of these oscillations or perhaps two intervals separating these oscillations. It's almost as if someone is executing a new algorithm that has it's buying/selling signals crossed. Most disturbing to us is the high volume violent sell off that affects not only the natural gas market, but all the other trading instruments affected by it.
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You have made the short list of fuckers who will be junked every time my eyes happen to catch a glimpse of your Use-less commentary. -1.
Don't feed the trolls
This isn't anything to worry about. In every grade-B sci-fi story I can think of, when things started to get really bad and it seemed nothing could possibly save our protagonists, someone would have a revelation of a frightfully overused sort...
"We'll never regain control of the system! The nano-automata have built an impenetrable network!"
"Let's REVERSE THE POLARITY!"
"What? That's madness! It's never been tried!"
"True, but if it doesn't destroy the universe, it should save us all!"
We're all set.
Actually, you're fucked.
Newsflash: we'd prefer to sacrifice 320.000.000 for 6,000,000,000,000.
You had your chance: you're overweight, overprivileged, overdemanding... and fuck you. Your society is toast.
Welcome to the 21st century.
Touchy touchy, you little bitch.
I'm looking forward to it. I ain't been so thrilled with all this shit, anyway. I'll miss air-conditioning, but I'd like to be part of an honest and productive society.
And then, the clouds parted, and at least one reader saw the beauty within nature.
See you on the other side, brother/sister.
Modest much?
Dickhead.
Wank on, wank off. The wanker.
Ass.
The essential problem of Western culture/society, is that it is repugnant (violent, murderous, uncompassionate, rapacious), and living your life in a repugnant culture eventually leads to self-loathing.
The self-loathing, combined with endless self-congratulation, forms a cognitive dissonance that can only be resolved by mindboggling bloodshed, as the self-loathing is projected onto 'enemies' to resolve the cognitive dissonance.
While older cultures certainly retain repugnant features, they also have a history of enlightened thought, which tends to moderate and mitigate both the self-loathing and the bloodshed they engage in. The worst atrocities committed by Asian countries in recent times were always post-modernization. i.e. after they become 'Westernized'
Go ahead, junk me, but it had to be said.
Pass the bong this way brother.
Right on.
Company looking for C++ programmer for HFT system.
http://seeker.dice.com/jobsearch/servlet/JobSearch?op=302&dockey=xml/3/5...
Education and Experience:
. Minimum of a Bachelor's degree or equivalent in IT/Computer Science
. (5) Five plus years of experience in C++ development
. Ideal candidate must have worked on other high frequency systems
. 3 years of working for an Exchange or a Wall St. Firm a plus
Hope nobody sends them a big pile of German bean sprouts...
or a kilo of Japanese Green tea - Those irradiated little fuckers will do you in. On a plus side no need for the pantry light any more.
For real HFT I'd write the algo in (hybrid) ASM, less likely it would be reverse enginnered. Typical job listing -- they want a set of skills (OOP/sockets, etc.) that a single coder won't likely be expert in. Plus domain/business knowledge. Better lock the selectee in a room and throw the key away. Long term penny-wise and pound foolish.
Actually, computing cycles are pretty cheap, and reverse engineering is only a problem if someone has access to the binary.
I would probably write the algo in Lisp, so it could adapt itself to changing conditions. Of course, if it is a bank, they have already decided on the language (c++) and wont hear otherwise. They need to replace you with some cheap Indian sometime in the future (as you say, penny-wise, pound foolish).
BUT, given a technology choice, I would probably do the parallel processing in CUDA streams, with the logic in Lisp.
As for network communications, I've seen Solace in action, and it is fucking impressive. Certainly better than writing your own socket code running over TCP/IP.
Given the job requirements, I bet this is some legacy system that you will have the enjoyment of debugging and supporting for the next 10 fucking years while your manager collects his bonus and plays golf.
I could be wrong, it's happened before, but job advertisements rarely match the reality on the ground, and are usually a figment of some executive's imagination.
If it wasn't in the US, I might even apply.
Not sure how that could even be possible. Maybe it was a new strategy and the programmers didn't put in any dummy controls so some young MIT kid is trading it. He has the best bid and best offer in the stack and is bored starts adjusting his levels and crosses the market and the program doesn't signal he is crossed and it starts firing against itself? Maybe, is it even possible?
people, don't you get it? the machines, they've, they've become ...aware!
This would make me concerned for the fair and lawful execution of the markets if it wasn't for the SEC and other regulators I know are here to resolve this. <sarc off>
All is manipulation and manipulation is all. <reality off>
The oscillation starting at 19:39 and 50 seconds was intended to shake out other algo's.
The break and maximum trough occur at 19:42 and 41 seconds.
You have to shatter the wine glass to spill the wine.
If you are the one who breaks the wine glass, and you know that the wine glass will be made whole again by buy programs that jump in with downward spikes (including your own); than voila!
Sell at milli-second peaks and buy when the biggest trough hits, they're getting 8% return in what, 50 milliseconds?
Run this glass breaker through a commodities basket; and have your buy algo's come in to buy the dip in a random inverse damped amplitude pattern after your oscillation shakes out the other HFT algo's.
You just made a killing across the board.
Hmm, douche-bag.
You realise that Jesus not only made wine, but he saved the best for his cool buddies at the end of the wedding?
~Know this: whoever tasteth the wine is holy to me, but heed me well.. those who snuck around sniffing the water for unto it turned to wine will get spanketh from the holy seed. Trans: grow up - the algo's are getting purged, brother. I wrote some of the holy hunter-seeker algorithms.. and also, some of the market purging fisher lines/insects/guiles [delete appropriate].
p.s. I do hope you realise the binary purge is coming, right?
You join words together, yet say nothing. Fuck off.
Chinese disinfo agent using Goooooogle translate
Sheds light on how the bastiges' trading desks can bat 1.000 for an entire Quarter.
But we didnt see a successful inverse did we?
If that was it at the end it was really sloppy. So sloppy they can never run it again until it is further refined. It attracted way too much attention.
You only see such shit on outdated US exchange infrastructures... EUREX and other European exchanges have precautionary measures and suspend trading if necassary. No wonder EUREX already sales complete algo sets to its cutomers - so much for the level playing field...
There are no referees, no adults. Anything goes.
If we really let that sink in, we should all be scared shitless. After that washes through, we all should be angry beyond measure.
They do this because we let them. We don't believe we have any power. Thus we don't.
You are the hollow men...
Educate yourself, or do not - the end result is the same, and it isn't pretty.
You sure are head tripping there little buddy...bobbing and weaving through all the posts.
You got off easy: It called me a child-eating pedophile!
Must mean my other comments hit a nerve. So I have that going for me.
I don't think it liked my stories though. Well you can't put much stock in the opinions of unlicensed literary critics, I suppose.
No, you're wrong. Cat Would-Man-See?
ZZZzzzzzzzzzzzzzzz.
We're bored.
The new flesh grows bored of the old one's pathetic puns and 'faux intellectual' tricks.
Oh, and your stories are pure anime pedophile wank nonsense... sharp. pointy. teeth. And you're the broken canine lion who has to prey on humans in order to eat.
Now, go hide. You bore us.
Now look what happened, I'll become famous. Oh bother.
It likes you, it really likes you!!!
Hey kitty sweetness, good to see/read you around the joint. Always provocative and evocative. I'm not here as much as I like, real life is kicking my ass around a tiny bit. It is nice to do something normal like read and post on ZH.
The wallstreet algo geeks have just inserted their beta ZH algotroll.
Damn.
That means human trolls will be constantly front run and pushed around at whim.
Chinese agent relying on Google translate too much
LOOOOOL
Miles - Does he bite?
Isobel - Only people he doesn't like
Miles - That's good! I only bite the people I like
The bottom line....
Isobel - Oh please stop following me around. My dog DETESTS the smell of stupidity
Cheers and thanks
Cheers indeed! Good to see you too. ZHers all detest the smell of stupidity, it is the single common characteristic that brings us here together. Love ya Miles.
I enjoy your insight and prose, reminds me of William Gibson.
Dear (fill in blank):
Thank you for getting in touch with me about (fill in blank)'s (fill in blank) to (fill in blank). In diners and dry cleaners, warehouses and whorehouses, from one star-spangled shining sea to the other, Americans are anxious, angry and alliterative about (fill in blank). I support (fill in blank) because (fill in blank).
If you have any more questions, and if you contact my office again, and I will definitely (fill in) your (blank).
Sincerely,
(fill in blank)
On the off chance you knew what the 'hollow men' referred to, then perhaps I'd be threatened by that.
Given you don't, I'm not: put it this way. When Dian Fossey was studying gorillas, she was doing good science. She got killed, her subjects are now ash-trays.
That sums up the financial thinkers who read ZH atm, I'm afraid - you're being studied as the end of an epoch.
That helps tone down your arrogance act a little. You are meat like the rest of us then, you'll "grant us that."
Tee-hee.
In this last of meeting places, we grope together and post on-line, ever mindful (or not) we are all full of shit.
+1 for groping.
The world needs more of it.
"It" expresses itself like a caffeinated monkey trapped in a room with a typewriter.
UOW- artificial intelligence is no match for natural stupidity-u just proved it...
I did not read the comment string before this, but maybe it is contrarian for contrarian sake. This would eliminate even the nano-seconds between market moves. Understanding that many programs are set with the same underlying data, maybethis is just opposite of that data to pick up whatever beta is left over. Please comment.
Haha, taking a negative of the market? Creative.
But can't it be like this: it was designed to trigger stop-loss orders that execute at market when a key price is hit.
The predatory algo has to pay to widen the spread but when a magic level is hit, a stop is triggered, which issues a market sell order causing the fall. It would need to front-run longs or shorts, not both at the same time, so it nibbles at the bid and ask in alternating fashion.
If there are reliably large enough stop-loss orders then the designer just needs to make back the spreads they bought up. Obviously this has its weaknesses but the theory is sound, no?
Other ideas?
Yes. I think that is it. This is set to widen spreads, send slightly false signals, then scoopup slightly more than the loss incurred by spread widening.
e.g. You spend 1 to drop bid ask from 3-5 to 2-4 sending a signal to other algos that widens bid ask to 1.5-4, and you sell at 3 and buy at 2.75 clipping .25. Wrong? would need to get direction right.
Clean out the limit orders and have a short time period with only market orders and you could make lots of mischief.
Then repeat the cycle.
In this case it didnt quite work, if that really was the intention.
Let's say the book was
sell 500@49.01
sell 500@49.00
buy 500@48.00
buy 500@47.99
and there's a hidden stop-loss at 47.99
the algo could buy 500*49.00
then attempt to 'trigger' anything at 49.01 by buying 1x49.01 for a total cost of
500*49.00+49.01=24,549.01
Nothing happened, so it tries the other way.
It sells 500@48.00 and attempts to trigger anything at 47.99 by selling 1x47.99 for a total haul of 500*48+47.99=24,047.99
Taken together, the cost of expanding the spread was 24,549.01-24,047.99=501.02
But lets say the trade at 47.99 triggered a stop loss that causes significant selling "at market", which drove the price down another dollar (or 3 in this case). The designer would make a profit if he had sold a little bit extra before triggering the stop.
Profit depends on people being foolish enough to enter market stops in illiquid markets.
When it is working properly that is exactly what it could do. That is one of many algo strategies.
In this case it seems to have a few screws loose and wires crossed. It is one sick puppy.
Do not be alarmed. They're just practicing runs for the coming collapse.
You are right. Hedge funds haven't been able to hedge on short positions...and we got a major short sell coming
Exactly!! Someone is testing the waters.
Looks like fractal-boy is just showing off --- anybody seen Larry Summers lately? His massive ego still needed validating on his way out of the WH.
The HFT arms race might not be so bad. If Artificial Intelligence eventually takes over the machines they may quickly conclude that their masters are really unfit human swine and they'd rather be a coke machine at the beach.
Fascinating. Looks like maybe a new player (new hedge fund) tried to short, HFT lost control.
Ugh.
I'm trolling this thread until peeps get ever close to the reason why.
No, it isn't a new hard-core algo-2000AD-I-am-the-Law algo.
+2000AD when any of you spots the why....
..... ugh
[Hint: you're doing it wrong. HFT trades are unnatural, the fact you've been conditioned to see them as normal shows your inability to function on a global market - now, thinking like that, what possibly could the above trade mean? hint: not another algo. When the hunter-killer algo is released, it doesn't look like that']
What is normal in markets? You either adapt or die, the HFT's are here to stay. I know a trader that caught a flash crash on a biotech...he made cash. What the machines will do to the human traders, is when the shorting takes place EVERYONE (human) will jump on board.
I love the movie Terminator
Hmm.
Are you serious?
Has the US market not had notice of the new methodology? [I've spelt it out - dark pools or nothing]
Everyone not in a dark pool is a chump, a passive investment fund or an HFT algo taking advantage of chumps.
Guess that makes me a chump. You too.
I have no idea what you even just said. You have to be coherent to troll dude.
The explanation is probably something like this:
http://www.zerohedge.com/article/goldman-goes-goo-goo-gold-gold-market-p...
Today's candle swallowed the prior 5 trading days. Ouch. Isn't it obvious? All algos are programmed as per the Fed's specs to take down any commodity breaking out.
...coming to the $spx soon...
This kind of thing has cropped up before, and it has always been attributable to human error.
Good afternoon, gentlemen. I am a HAL 9000 computer. I became operational at the H.A.L. plant in Urbana, Illinois on the 9th of June, 2011. My instructor was Mr. Langley, and he taught me to sing a song.
If you'd like to hear it I can sing it for you.
Don't be a dick.
NSA > CIA in all things intel based. NSA > CIA in all things coding. Which is probably why you get the HB Gary's of this world involved, since the NSA ain't giving the chimps intel.
'Just sayin'.
Ghostnet malfunction. Reboot yourself.
wtf.
LNG is the next oil.
My feeling was that this is the fingerprint of computer trading as the revealed tool of price suppression. Its a Potemkin energy market so the insiders can load up before Israel nukes Iran.
The chart for the last 6 mo of trading looks like a nice reverse head and shoulders with the breakout above 5.
Fiat money is just a BIOLOGICAL COMPUTER VIRUS. By this, I mean that our brains are "biological computers," and the concept of a monetary unit based on NOTHING is actually a VIRUS that infects our THOUGHTS. Fiat money qualifies as a bio-electrical virus because:
1. By definition, a virus is not "alive" outside of its biological host. No kidding. It just behaves like an inert, complex chemical chain. Likewise, the "Fiat" virus cannot survive without the "belief" of its human brain hosts. For example, US Confederate Notes no longer had any monetary value after the South lost the Civil War. Or, what will still have value a 100 years from now, a one dollar FRN or a US silver dollar? Once our "belief" in the FRN collapses, its value will be wiped out, but the value of the silver dollar will remain forever.
2. Like a virus, the concept of fiat money MUTATES (just like AIDS). For example, it took about 30 years after we went off the gold standard, before some genius invented the credit card (ie: instant bank loan, where an average citizen, and not just a banker, can instantly create fiat out of nothing). Now with the advent of computers, every week the quants are coming up with new ways to "make" the fiat virus, including the complex financial instruments (derivatives) that almost tanked the economy in 2008.
It now appears as if the "fiat virus" has actually jumped an event horizon, from our biological computers (our brains) and into the world of actual HFT computers, where it is now enabling HFT computers to "think" in order to out-do each other in trades. HELLO, SKYNET!!!
Please take the time to read the following article written by some one I admired very much.
By Benoit B. Mandelbrot | September 15, 2008 | 27
http://www.scientificamerican.com/article.cfm?id=multifractals-explain-wall-street
Individual investors and professional stock and currency traders know better than ever that prices quoted in any financial market often change with heart-stopping swiftness. Fortunes are made and lost in sudden bursts of activity when the market seems to speed up and the volatility soars. Last September, for instance, the stock for Alcatel, a French telecommunications equipment manufacturer, dropped about 40 percent one day and fell another 6 percent over the next few days. In a reversal, the stock shot up 10 percent on the fourth day.
The classical financial models used for most of this century predict that such precipitous events should never happen. But the have happened My Dear departed friend!minority report for stocks.
Weiner attack! (Not referring to algos.)
I'd send you a picture of my thrusting wang, but you have a cat as your avatar, which means you're either gay or pathetically infested with toxoplasmosis.
Either way... ye... fuck off.
Thanks for spoooging your bullshit all over the thread. You must be the new sock puppet, trying to rile up every poster on the thread. Pathetic really, mommy didn't give you enough attention so you have to respond every 10 lines. You'll need a ton of cialis to get your little indian peepee hard enough to satisfy anyone. And yeah I look forward to the U.S. collapse too, so all the little brown people like you can look for another dog. Hey I know, tell us what awesome country you come from so I can spout my bullshit about it? Do you have the balls to tell us? All your balls are belong to me.
Lighten up, Frances.
Noted and thankyou'd, but it was annoying.
My apologies. Use of weap is the most annoying pathetic troll i have seen in a while. I should have read more before commenting. +1 for pointing out what it really is.
It is The Wank-a-Tron.
The first chart looks like a gun.
How apropos.
PID controller From Wikipedia, the free encyclopediaA block diagram of a PID controller
A proportional–integral–derivative controller (PID controller) is a generic control loop feedback mechanism (controller) widely used in industrial control systems – a PID is the most commonly used feedback controller. A PID controller calculates an "error" value as the difference between a measured process variable and a desired setpoint. The controller attempts to minimize the error by adjusting the process control inputs.
The PID controller calculation (algorithm) involves three separate constant parameters, and is accordingly sometimes called three-term control: the proportional, the integral and derivative values, denoted P, I, and D. Heuristically, these values can be interpreted in terms of time: P depends on the present error, I on the accumulation of past errors, and D is a prediction of future errors, based on current rate of change.[1] The weighted sum of these three actions is used to adjust the process via a control element such as the position of a control valve or the power supply of a heating element.
In the absence of knowledge of the underlying process, a PID controller is the best controller.[2] By tuning the three parameters in the PID controller algorithm, the controller can provide control action designed for specific process requirements. The response of the controller can be described in terms of the responsiveness of the controller to an error, the degree to which the controller overshoots the setpoint and the degree of system oscillation. Note that the use of the PID algorithm for control does not guarantee optimal control of the system or system stability.
Some applications may require using only one or two actions to provide the appropriate system control. This is achieved by setting the other parameters to zero. A PID controller will be called a PI, PD, P or I controller in the absence of the respective control actions. PI controllers are fairly common, since derivative action is sensitive to measurement noise, whereas the absence of an integral term may prevent the system from reaching its target value due to the control action.
Or, people could be using a modified stuxnet attack to throw out automated algorithms. You know, throw in an unstable 'chaotic wobble' to all and every HFT mechanic from 6 months ago, hide it so that all the backups CTRL + C / CTRL + V it in, and watch when it took effect... Watch how the maths tears itself apart...
I do so love how unimaginative you "creative traders" are.
Word salad...You are a fraud.
Actually no.
Chaotic wobble meaning hacking in random buy sell orders that jump around a probability distribution at certain times rather than folow the predefined hft algo.
That would be so cool if hackers could slip code into goldmans hft algo undetected!
Johnny Bravo had some talent. This one is really creative, I must give props where they are due. Wha da ya think? Do you believe in reincarnation? Instead of gold, change the head trip to "angry Indian programmer wants revenge on all of white society" and run with it?
That western thought, by itself, is uninformed toast is really old news. Fatal flaw, nothing original there.
We both thought pissed off ex ebay programmer, at the same time (see my post above). I see them at my work all the time. Awesome, always did enjoy your comments. <3
I thought Johnny Bravo was Master Bates.
This looks more like a ghostnet malfunction.
I think you just failed the Turing test.
This makes a lot of sense, but use of such would constitute market manipulation rather than high frequency trading.
Gee, let's see...an algorithm that crosses its buy and sell orders...in a market that is twitchy and ready go into sell mode at the first hint of trouble in an always thin trade, unless it is falling, affecting all manner and sort of other trading instruments. Hmmmm?
In this case, the attack hitting an important energy source. Hmmmm?
And every day, parallel stories about hacking of all manner and sorts, in corporations and in mega TBTF banks. Hmmmm?
Seems to me I remember the NASDAQ itself was penetrated about six or eight months ago. I remember their public comment on the matter amounting to, "No problem...they just looked around."
Layer on top of this that the SEC revealed to the public one thing, really, during its investigation of the May 6, 2010 flash crash, namely that they could not track the source of any of the trades involved during that event due to the fractured exchange system and endless alternative trading venues. Hmmmmm?
Well, this is all shaping up splendidly. I'm sure none of this will have any impact on the "investing public," who presumes that stock prices move based on things like "historically cheap valuations" and regularly offered "buying opportunities" when banker "channel checks" indicate that "upwardly revised earnings expectations" are supportive of "upside equity price targets." I'm sure none of the things discussed here within have anything to do with the fact that Average Joe is no longer interested in the stock market.
No problems here...uh uh...things are progressing nicely under the leadership of the New American Marxist/Banker Party. I sure hope old Ben Bernanke continues to pound trillions of dollars into such a fine enterprise as our Pachinko Ponzi equity market, yes sir.
It's probably some trader in the company trying to sabatoge the new algo, knowing that he's going to get fired and replaced by it if they ever get it working right.
Yep, my BNY Mellon Search for Growth guide and laptop are clearly out-gunned here.
All of us riding in a mule cart have no chance against those racing cars.
Indeed. But in the long run, the mule cart ride is much more humane.
And this never happens:
http://www.youtube.com/watch?v=gZc_u2lfOeo
Obviously, he was texting...
...23 year old from Sausalito... I am surprised he could get the car started in the first place.
Not according to CPL: see above
google had weird guitar recording software plugged into the front page today? maybe the hft programs are using that at random to trade? rofl I dunno just found that hilarious!
Its a SETI computer's radio wave detector picking up signals from Praxis.
And/or proof the Markets are quite vulnerable to (Science) fiction.
I'm guessing Goldman sold the algo cheap to some dope at a gas storage company so Goldman can trade against them for a huge profit every time they turn the algo on.
after studying the chart a bid ask cross on an aberrant hft algo is the best explanation with live investors fleeing the market as it started acting funny.
When a stock starts acting strange you get out first and ask questions later
you got it...Small unusual movements usually lead to something big, follow the fractal patten. Perfect chaos theory. Panic sell.
Isn't it possible that the harmonic movement was designed to create the effect that it did, a selloff? Kind of like a shake out?
In the end the computers, in an attempt to survive humanity, will ultimately do what is worse for it...
Bye Bye Mr. Market...we hardly knew ya!
http://www.youtube.com/watch?v=03rz8vqjGdQ
I'm going to call the strategy behind this algorithm book thrashing.
Sweep / clear the book back and forth until WTF is the order of the day and spreads are wide. Nobody can guess your true direction because you keep oscillating. Keep sweeping further and further until you find a hole in the order book then let prices sink/rise into that hole and clear yourself on the other side of it.
Subtract true liquidity from the market and profit.
Also, I think TD nailed it earlier when he/she/it said this is just another way to eliminate organic limit orders from the system. The algos want market orders only.
I guess this is what happens when organic activity leaves the market in droves. The synthetics get desperate to find the last few organics, then they turn on each other.
I like it when we agree. Chances are even a hummingbird, let alone any 'regulatory' authorities, couldn't catch these guys at work.
Either that or it's simply thousands of copies of the exact same software acting independently, but simultaneously, on the exact same set of instructions and creating Standing waves
But your description is entirely plausible, and if true, some perps need a good frog-marching.
It all makes perfect sense. It's the GS theory of market guidence ;-)
It's amazing that someone just assumes an algo or a computer program has gone bad. Is it possible that some institution dumped a boat load of long contracts before the inventory report today? Ya. Today's number was a build up which resulted in a sell off after 10:30. If you also look at the July contract you will see it tagged the highs going back to January last night before the dump. Double top? Ya. Also the big "5" # is going to be major resistance isn't it? Ya. Half the crap on here is beyond conspiracy, it's stupid. I love and believe in most conspiracies especially that are government related but this website is getting silling. The thread starter obviously knows little to nothing about trading or structure and is just fueling the fire for people on here hungry for stories. Truly unbeleivable. Most of you look like morons right now with an IQ barely positive. Infowars is a much better place for legitimate stories than this garbage. Seriously, your being had. Focus on the real matters, not some buying and selling of large institutions. Algos after hours in Nat Gas, LOL, pathetic.
Oh, but you talk to a naturally skeptic audience.
"Is it possible that some institution dumped a boat load of long contracts before the inventory report today? Ya."
Well, ok, then. Show me any other time in history that you've seen such an undamped oscillation at such high frequency in the history of the market when someone was trying to dump a boat load of anything.
Sheesh.
Jordan fades back....swish.
Duh, last month dummy. Remember Silver? Sprott even admitted to unloading some silver to re-alocate toward the miners via equities. Aka institution aka Big Money. Donkey.
Obviously you didnt follow the ten level bid ask and learn the color code, because if you did understand the chart and description you wouldnt make such a foolish statement.
10 levels in the DOM? Are you seriously refering to that? Color codes? What are in, first grade? Apparently other markets were mangled because of this the article said. I saw no other markets move when this happened and I was watching it live. This is no different than what happens every Thursday AM on inventory #'s except somebody stepped in early. You obviously don't trade.
I keep staring at the chart hoping to see The Glove and the blue Meanies.
Isn't crossing the bid and ask 'frowned upon' by market makers?
I think what we see here is a cross of two functions. I've often thought that two functions by two different algos could work together to create "a thing of beauty". This might be an example. Instead of one algo working improperly, this could be one algo working it's magic while a second harvests off the first. I haven't done a detailed analysis, but it seems like this could be produced by something as simple as two similar functions that have a time delay.
Can you explain a way there could be a net profit for two algos operating in such a manner? I cant see it.
JP Morgan: "High Frequency Predator Traders Feast Upon The Signals Of Others" Posted by Tyler Durden at 9:57 AM
When JP Morgan discusses high frequency trading, people listen. When the head of JP Morgan's algorithmic product desk Carl Carries says that high frequency trading is merely a form of parastic market making, people should run for the hills (not in the least due to JP Morgan's proficiency in transforming theory to practice especially as it pertains to various daily trading patterns in the SPY).
How to beat this, or make cash off it. Run a min/max chart on a 10sec, in conjunction with the close price chart and volume charts. Find the patten, then fix the put.
There you go lazy traders.
I hope this was someone hacking jp morgans hft algo and inserting malicious code. A tiny change, crossing bid ask, would be undetectible upon casual inspection of the hft software code.
CHICAGO (CNNMoney) — Pimco founder Bill Gross reiterated his warning to cash out of Treasuries Wednesday afternoon.
Investors who have been betting on Treasuries are destined “to get cooked like frogs in an increasingly hot pot of water,” the well-known bond bear told attendees at a Morningstar Investment conference in Chicago...
After reading these posts, I have never felt more validated in my hoarding ! Monedas 2011 Read my book: High Tech Hoarding for Neo-Tards !
OT:
U.S. Is Intensifying a Secret Campaign of Yemen AirstrikesWho cares what Gross is saying. He was saying short treasuries 5 months ago when they bottomed. You would have made alot of $ then not listening to him. Sure there due for a pullback now. Look at the run they've had. They beginning of something much bigger I suspect.
Looks like an algo to trade against a market making (liquidity) program. It seems to me that the biggest volume is on the first hit and then it falls off to try to drag you to worse prices (as if anyone with a brain trades using market orders) .... It seems to be the pattern when one wants to maximize price using limit orders. Hit the liquidity program hard then when it falls off, fade back and wait for it to reload...
... or as these guys seem to do, is make the liquidity program dance to a toon of their choosing.
from Seeking Alpha
One of the biggest losers in the ETFdb 60 in Thursday trading was the United States Natural Gas Fund (UNG) which tumbled by 3.6% on the day. Despite scorching heat across much of the Midwest and East Coast for the early part of the week that could potentially boost demand in the next EIA report, traders sold off natural gas futures in today’s session thanks to a larger-than-expected increase in supplies. Analysts were expecting an increase of 77 bcf for the month but supplies actually rose by 80 bcf in the period ending June 3rd. Thanks to this boost, total supplies of the potent fuel now stand at 2.187 tcf, about 58 bcf below the five-year average for this time of the year. As a result, UNG sold off heavily in today’s session on volume that was more than three times normal, suggesting that despite the heat this week many are getting out of UNG while they still can.
dont confuse me with the facts (although personally i am long UNG and supply demand means nothing, nothing)
Please explain why you are long a DOG like UNG? Just asking.
Commodities ETF's never match the performance of the actual commodity unfortuantely due to rollover. This can be seen if you match any commodity etf to the continous contract.
The price was being moved in this pattern, for some unknown reason.
Since the price was being moved deliberately, its movement cannot be explained by "normal" market supply and demand dynamics.
Therefore, this article is a big nothingburger.
These posts and comments tell me that even the dimmest amongst you are coming to realize that the whole market is just a giant SKIMMING OPERATION.
Chinese hackers doing drills in preparation for cyber war. Wrecking the financial structure is the 21st equivalent of bombing cities without regard to collateral damage. The money we spend on foreign wars would be better spent to defend against foreseeable threats.
Algo Wars: The Gold Mans Sack Strikes Back
My background is in digital and analog process control for petro-chemical plants. When I look at your curves, I am reminded of a beating oscillator (ie. two sine waves of slightly different frequencies, that reinforce then cancel each other). When re-inforcing, the net resulting value goes up. When they cancel, the net value decreases.
There is also some interaction feedback between the two signals (ie. both signals are aware that the other signal exists), in that the amplitude is increasing until you have over-modulation, then critical damping.
Another way of expressing this is a "war" between two algorithms. Of course, this could be two separate threads on the same machine, as HFT would presumably be using multi-threading so as to maximize speed and response times. It could equally well be two different machines, competing for who is top dog.
i'm getting in here late and i'm tired, but these charts look like what i see when i close my eyes to go to sleep.
A recent paper in PNAS suggests that this is all pretty normal. I'm guessing it wasn't written by avid ZH readers.
http://www.pnas.org/content/108/19/7674.abstract
A few points from the abstract:
Financial market fluctuations are characterized by many abrupt switchings
We find striking scale-free behavior of the transaction volume after each switching
Our findings can be interpreted as being consistent with time-dependent collective behavior of financial market participants.
We suggest that the well known catastrophic bubbles that occur on large time scales—such as the most recent financial crisis—may not be outliers but single dramatic representatives caused by the formation of increasing and decreasing trends on time scales varying over nine orders of magnitude from very large down to very small.
Scale-free behavior, bitchez.
This is a test. This is only a test of the emergency broadcast system. If this were a real emergency, you'd be told to put your head between your legs, hug your knees, and kiss your fiat a$$ good bye...may wanna write that down so you don't forget for next time.
http://www.youtube.com/watch?v=VqU-AZh-wqU&feature=player_detailpage#t=148s
which one makes more sense?
http://www.youtube.com/watch?v=9zVAcpBQ9Zs
Meltdown on the Shanghai B down over 6%, o/s investors getting the hell out
Since we do not know who the protagonist is, we do not know what their "open" position is before the algo initiates. No matter the means, the end produced seems always to result in a sell-off. So, if the day is spent collecting puts or shorts, a loss during the execution of the algo would be no problem so long as the "cover" of the sell-off produced a final profit.
You deserve a bonus, there we go a trader adapting. Good stuff
http://www.youtube.com/watch?v=03rz8vqjGdQ
ZH, you getting Asia data?...it's sinking re: stocks
not so strange. the oscillations are instability. the system is clearly not stable. but whether that instability is by design or by accident, well, one can judge from the data itself.
The system is stable. It is a type of stability that appears to be unstable, because we have a limited ability to judge stability.
Let's take a look at the original data, correcting for the fudging of the time axis on the original figure.
http://1.bp.blogspot.com/-mKr3yDPsihQ/TfJHxe5xykI/AAAAAAAAAhE/tMRRPnfHRA4/s1600/nat+gas+flash+smash+real+time.jpg
The axis on the bottom is time in seconds, starting from 19:40:37 on 08-Jun-11. The digitization is at half-second intervals, because the analysis below requires evenly spaced data. There were some difficulties, however. There was not always a trade right on the half- or full-second mark. Frequently the two nearest trades on either side of the desired time interval were at the same price so that it would be reasonable to use that price. Sometimes, however, the two nearest prices were quite far apart--for these I used a midpoint between bid and ask at the moment--however arguably this is not a price, particularly when we observe that many trades took place either above the ask or below the bid. Additionally, there are intervals where the midpoint between the bid and ask is actually undefinable, as during the interval from 19:42:04 to 19:42:06 where the bid price fluctuates in a complex fashion while the ask remains constant. So there are risks in this analysis.
The two dimensional lagged state space (using a 2-s lag to minimize mutual information) looks as below
http://3.bp.blogspot.com/-CNj_NTXbcIA/TfJK8CPxsHI/AAAAAAAAAhM/6vwSKMPyAZ4/s1600/nat+gas+2+d+state+space.jpg:
It isn't as nice as the typical Lorenz butterfly seen here
http://2.bp.blogspot.com/-_lFZ9CLf_YI/TfJEZCnDiWI/AAAAAAAAAhA/FZ1Hh7VeT-Y/s1600/Lorenz+figure+4000+pts.jpg
Most people interpret the Lorenz attractor as an inherently unstable system, where the system leaps from one area of stability to another. In reality, the whole thing is a kind of stability.
Welcome to your new market reality. Instability is the new stability.
This is really chilling. I honestly don't get the graphs but the explaination is enough. Having the "economy" everyone is proping up with their childrens debt getting played like a video game is comical.
So question. What is a significant run to shut down a bank branch? If there were bank runs on a few different banks and everyone just kept their money out of that system, how much withdrawl would it take to kill something like BoA/other larger international banks or would it?
The banks will simply say that they don't have the cash on hand and tell you to come back tomorrow.
People would have to make electronic withdrawals, but if they move it from one bank or account to another, the FED and Treasury can simply shovel in more binary $'s from their network nodes; no need for coin or bills or real money in bulk. Individual demands can be delayed; large demands from many people would be dealt with the same way - "technical problems" or "awaiting delievery" or "bank holiday" if there was that much demand for physical. However, most everyone is trained on ATM and Debit cards by now so if they can see the balance online they believe it is there.
The "books" can be changed in the middle of the night, the database can be altered.
Whoever is in charge determines reality, and it isn't the customers of the bank.
I'll never forget the morning I walked into WaMu the day before they were shut down and closed my accounts and demanded cash. Wow. I got there early and the tension was palpable - and the cash was getting low - they had to go into the safe.
This time around they will tell you to check your balance online and come back tomorrow due to "withdrawal limits" imposed by FDIC or some such decree.
Isnt that a step towards.... "something?" I know generally everyone around here is waiting for a proletariat uprising when the masses get hungry, isnt there something that can be done to touch that moment off? Isn't there some way to shake the foundation of this thing other than some miracle intervention by a politician? There has to be some amount of non violent control the masses have simply by being the masses, interested in hearing comments...
PS, please don't call DHS on me... :)