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Trading Stocks? Pack Your Dramamine
A few days ago we discussed that the market no longer responds to any fundamentals but merely gravitates toward various chaotic "strange attractors" now that HFT-driven stock trading patterns are merely Mandelbrotian fractals, with no rhyme or reason behind self-similar trading patterns and unprecedented record daily volatility. Today, David Rosenberg provides the following chart best capturing the minimum RDA of dramamine required to trade stocks: with 6% average swings in 12 distinct periods in 2010 alone, even with the market virtually flat for the year, it is no wonder retail investors have decided to say goodbye to stocks for ever. This is not a market in which anyone, including retail and institutional investors, with the possible exception a few momentum inducing algos, can generate any alpha. Period. And leveraged beta trades are a recipe for suicide for anyone except those with discount window access. Which is why very soon the only ones trading stocks will be the primary dealers and those who pay multimillion monthly collocation fees to the NYSE in hopes they can frontrun a trade here or there (oh and SEC, your inability to halt flashing a year after saying you would do so, continue to inspire confidence that you are on top of your corruption game).
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They will not fix the structural problems, so the market will die its slow, ugly death.
hft is certainly easier than trying to keep track of chips
And here I thought it was my old office chair that was rocking back and forth. Who would of thought (based upon the cuts and bruises I've suffered) that it was the market that's moving erratically and my chair and desk were rock solid?
Maybe a seat belt and air bags are in order?
Next stop: -8.9% again
It's all good.
Markets will trade marginally higher on Q2 earnings and algos will have the whole of August to themselves in order to continue their whacky low volume meltup.
it ain't the algos
it is THE ALGO
the one used by GS and JPM with unlimited margin courtesy of the NY FED, which they own
Strangles... vix<30 close to expiration... I love it!
If your last article about the hurst exponent is correct then that should tell you how to trade. If the hurst exponent > .5 then you put on mean reverting strategies or sell the rips and buy the dips. If its less than .5 you want to be a trend follower. At .5 and there is nothing.
Markets that are hugely volatile generally mean that the the 'value' consensus is 'bipolar'. Another way to think of this is that the bid/offer of the buffet types is very very wide, which leave a lot of room for the little guy to be a 'market maker'.
There are huge number of stocks that have dropped 40 -50 % in the last two months. Does anyone really think that the macro outlook for say 10-20 years has changed so dramatically in that time to justify these swings? So if you are in permabear mode then just stay short forever and be right or wrong, otherwise maybe take a look at a few balance sheets and wonder why you might be getting a 40 off sale......
As I pointed out to Sudden Debt, today was my day to short so I went with Ford and Ryland, based on poor news, and of course they're both up.
How were the intervals for that chart generated? The S&P didn't behave monotonically for most of those periods. You have 6 week periods along side 3 day periods. What parameters were used to determine the beginning and ends of the "swings?"
Looks to me like it was peak to trough to peak to trough, high to the next low to the next high.
Word is on the Street J.P. Morgan is a constant dip buyer. Time for J.P. to learn a lesson - or two.
Dude, its so past that time. Its head rolling time - and I'm not talking metaphorical. This is definitely one instance we should look to the Chinese. They put people to death for fucking up on such a large scale. Remember the baby food problem? Two put to death, including the food safety chief (think head of the FDA). Time for the regulators who fucked up to lose a hand or a foot at least - and if they are deep in it then its the head and game over time.
Yes.
The stock market for the past decade has simply been a very long game of musical chairs, except we're playing with money instead of chairs.
Here's how it's played: Everyone who plays puts their money into market, and then the banks spin the market up, down, around, whatever (taking their various fees out of the put, thus ensuring that THEY make money). Then, after everything has been mixed up in whatever manner the banks choose, we all grab back as much money as we can.
Because some people end up grabbing more money than they started out with, we maintain the illusion that money is being "made" somewhere. It's not. Money is always being lost. Market going up? Shorts lose. Down? Longs lose. Sitting still? Option buyers lose. The players ALWAYS lose. Always. We just don't know exactly who the losers will be until the music stops at the end of each violent swing.
Goldman F***ing Sachs will rape today
they will rape tomorrow
they will rape every day they continue to be allowed to rape the shit out of the world
courtesy of our corrupt-to-the-core government whores
Okay, so we have a rough draft model showing self similarity on ever smaller timescales, thanks to HFT, revealing that the little-big swings with nothing but trading rules behind them should be expected on larger scales using similar trading rules. So even rallies and crashes could be "explained" by just referencing the model. Theoretically, a rally could occure without any significant external event triggering it.
This gives us volatility, but not manipulation. How to distinguish between a natural rally (natural to the model) and an anomaly?
I'm still thinking hard on this, but here's my first thought. The anomalies should look different from the rest of the fractal pattern, the most obvious being the stops put in place whenever their is a plunge. These can pretty much be seen with the naked eye when looking at charts.
This means, in my mind, that the market could be manipulated just by not allowing it to go down without triggering stops while NOT using stops on the way up. Wouldn't that be awesome, if you had yourself a market that almost wanted to give you big swings in either direction so that you could sit back and allow the ones you also wanted?
Short version:
This is a wet dream for any member of the PPT or anyone who provides liquidity at the right time and removes it at right time.
Whether it is Goldman Sachs or the hole in the wall One office brokerage doing boiler room operations, it all gets back to commissions and fees. That's why one of these jackass discount brokerages (Canadian, hint hint) fucking cold called my Mom to sucker her into a high fee low yield "target maturity" ETF for people with shit for brains.
More volatility=more irrationality=more buying and selling=more commissions and fees for sitting around passing paper airplanes across the room. You fucking figure it out.
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