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Watch Out For T+3 Selling

Tyler Durden's picture




 

Today, we are reminded,  is the T+3 deadline for most mutual funds for trade settlement before November 1, which just so happens to be is the start of the news fiscal year for a majority of asset managers. The last two days of October will see very little if any action from the non-vacuum tube side of things. Which is why expect mutual funds to take profits aggressively ahead of the end of their year. The only real question is how many HFTs will be simply shut down should selling pressure accelerate, and when Waddell and Reed decides to flood the market with a sell order of 10 ES contracts. 

h/t SellPuts

 

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Wed, 10/27/2010 - 10:58 | 680485 CPL
CPL's picture

October, the quadrupal witching month.

 

I'm with Tyler on this one, the HFT's have usually performed baddly when assloads of humans are pushing the sell button on something. 

 

Alternatively who wants to bet the human side of the equation goes into commodities and we see oil back to 90 after the month is done in a couple of days.

Wed, 10/27/2010 - 14:09 | 681017 Questionmark
Questionmark's picture

90 dollar oil probably isn't sustainable in this economy. If prices hold above 85 for an extended period of time then expect to see more demand destruction.

Wed, 10/27/2010 - 15:40 | 681135 CPL
CPL's picture

Oh it will be, we'll be at $100 by Xmas.  I'm saying 90 in the next couple of days.  Then the fun begins.  When it hits 120 - 180 next time on the top end, then we'll see the demand destruction hit again.  Oil should be 220 a barrel with demand and industrial requirements, but like food it's subsidized up the ass.

I can't see what the mutual funds seriously are looking at that has any real long term value.  I suppose it doesn't matter though, they only hold for the year and my understanding is they are starting to hold tight stop losses.

So it's the quadruple witching and last year in October the future looked reasonable to a mutual fund manager.  This year, the same bunch are shitting their pants and are just starting to understand the world is a lot bigger than their shitty pool of borrowed capital.

 

With this might I remind everyone, they are under some type of obligation to perform better than a savings account.  Most haven't even achieved this if most of our long term investor friends have anything left worth mentioning under their 401k's and RRSP's.

So what is a MFM going to do?  Buy commodities because Mutual fund managers are teh sheep now being herded and wounded by each other HFT's.

Wed, 10/27/2010 - 11:07 | 680510 RobotTrader
RobotTrader's picture

Anti-dollar plays are getting "flash crashed" today.

Total forced liquidation and margin calls are rolling in.

Wed, 10/27/2010 - 11:56 | 680652 HarryWanger
HarryWanger's picture

And the two high flyers, NFLX and PCLN are both positive again today. So hilarious how many people here don't really understand how this works.

Wed, 10/27/2010 - 14:14 | 681035 tallystick
tallystick's picture

Tell us HW, how DOES this work?

Wed, 10/27/2010 - 11:09 | 680516 RobotTrader
RobotTrader's picture

NYA just crashed through the 20-day

Wed, 10/27/2010 - 11:13 | 680526 HarryWanger
HarryWanger's picture

Market is selling off on "better-than-expected" economic reports. This is a setup. I said this last week and yesterday. There will be a fake sell off on "OMG - the Fed might not implement QE2". 

It's a setup so that the market can rally to high heavens on the announcement of QE2. 

Wed, 10/27/2010 - 11:19 | 680539 LongSoupLine
LongSoupLine's picture

Please buy those dips Harry...I need someone on the other side of the trade (so does Goldman)

Wed, 10/27/2010 - 11:37 | 680554 SheepDog-One
SheepDog-One's picture

Sure Harry, all that market pump from DOW 9,800 2 months ago based on a massive SuperSweet 16 Wall St birthday party present of trillions in Q/E really means nothing, yea, a full sized Ferrari cake was set to be delivered at midnite for the 'best ever present' (even better than P-Diddy's chocolate fondue fountain)...but now that they send in a Yugo cake made of mashed up twinkies and a measly $300 billion in boring bond purchases, its all good the spoiled brat will understand!

Yea we'll see how much gas your market rally to high heaven has real soon.

Wed, 10/27/2010 - 11:34 | 680571 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Harry, any human investor who has money already put it into the market over the last couple of weeks. Everyone is leveraged on one side of the trade and cash reserves are depleated. When the margin calls start rolling in they are going to sell against their will to cover them. Please tell me where new money is going to come from to raise the market?

Wed, 10/27/2010 - 11:39 | 680588 SheepDog-One
SheepDog-One's picture

When its discovered the FED is no longer buying up everything in sight at a constantly higher price, reality will quickly set in and it will be very ugly.

Wed, 10/27/2010 - 11:33 | 680572 homersimpson
homersimpson's picture

This ain't no setup. This is what happens when the Fed doesn't lubricate Wall Street with the US taxpayers' money.

Wed, 10/27/2010 - 11:44 | 680606 HarryWanger
HarryWanger's picture

I can't believe you guys can still fall for this stuff. They ramp up the market for 2 months on the Fed announcing QE2 due to a "weak economy".

Economic numbers, although not great, have been pretty much in line. You get everyone screaming everywhere that there will be a "sell on the news" on the QE2 announcement. But wait - numbers aren't so bad so "maybe we won't get QE2" they all scream now. Sell!!

Of course they all know that we do get QE2 and this is a way to get in lower so they can now be "surprised" by QE2.

And you guys always fall for these games. BTW: I did get back into AAPL on the gamesmanship this morning that brought it down below 306 - just where I was looking to get back in.

 

Wed, 10/27/2010 - 11:55 | 680642 SheepDog-One
SheepDog-One's picture

I cant believe you fall for this stuff Harry. Youve bought into the fake matrix.

Remove the FED monetization of everything under the sun Harry, remove the HFT algo trading bots, remove the constant cash infusions to the markets, remove the data and price manipulation and let the markets open one morning with just floor traders trading wire orders and THEN lets see how great everything is!

Wed, 10/27/2010 - 12:04 | 680677 HarryWanger
HarryWanger's picture

No. I don't buy into the "fake matrix". I buy into what the market does. If it's going up, I buy. Been working great for a couple of months. If it trends down, I short. 

To trade it, you have to understand the game and how it's manipulated. Today is manipulation to try to pull money out on the premise that QE2 might not be as big as originally thought. All along knowing that it will so there will be a "surprise" when announced spiking the market.

That's how it works. I'm buying a few things in front of that today and hopefully, if it continues to drop, tomorrow as well.

Wed, 10/27/2010 - 11:45 | 680608 Jeff Lebowski
Jeff Lebowski's picture

Clear, concise, and accurate answer.  Well done, Homer.

Wed, 10/27/2010 - 11:47 | 680623 SheepDog-One
SheepDog-One's picture

Fact is Harry, the markets are already far more highly pumped than at DOW 14,000 bubble when pegged to real economy and any sane valuation. I dont see how any sane person can look around and see great market upside anywhere. 

Your 'better than expected earnings' are just rubbish, based upon greatly lowered estimates, so you can marvel at the pole vaulters clearing bars buried 2 feet underground all you like, but you must see it for the BS it really is. 

I dont know who youre trying to convince here with your permabull cheerleading and calls for markets to now ascend into the heavens, but its starting to make me feel embarrassed for you.

Wed, 10/27/2010 - 11:23 | 680543 Jason T
Jason T's picture

So many of the best performing stocks have massive institutional/mutual fund ownership.

With no one out there to buy, once these guys start selling, prices should fall... I think.

Wed, 10/27/2010 - 11:25 | 680547 Rasna
Rasna's picture

Tyler,

I front ran Waddell-Reed's 10 ES short contracts and raised them 40 more...

Wait a minute, I've got to take this call from some guy from the SEC...

Wed, 10/27/2010 - 11:29 | 680558 Eduardo
Eduardo's picture

Argentina's former president is dead.

After the dis-industrialization of our country, after having a financial dominated economy with nationalization of debt, after the badly corrupt privatization of our resources, after con-nationals have been disappeared to enforce that path he was a President who fought for justice and economic development.

Not living in Argentina now, I traveled ~400 km to the consulate to vote for him in the previous elections.

You will be missed. Rest in peace. 

Wed, 10/27/2010 - 11:30 | 680562 Hansel
Hansel's picture

This may be a dumb question, but do these same mutual fund owners who might be selling today mark the stock prices from today's close on the investors' account statement, or do they have to take the mark at the end of the month?  Is there a 3 day vacuum at the end of the month where, if fund managers don't sell today, they are at the mercy of the market price 3 days from now?

Wed, 10/27/2010 - 11:30 | 680563 SheepDog-One
SheepDog-One's picture

Dont worry, the permabulls have all been convinced that the FED just keeps buying everything under the sun forever, full-on lulled into Hindu bull calm....I'm sure that will work.

Wed, 10/27/2010 - 11:32 | 680567 JuicyTheAnimal
JuicyTheAnimal's picture

It seems to me they are testing the market with different ideas.  Kind of reminds me of a baby playing with one of those toys that has different shaped holes and different shaped blocks to fit inside.  

 

Bernake:  "Hmm let's say it's just hmmmm gonna be yeah, um, 300B for starters and see what happens.  Oh ok, hmmm, very interesting, we can do more without creating a massive commodity bubble".  Let's try and hit that magic amount that's just under hyper-inflationary.  

 

In the end all you have is a toy with some blocks inside and some blocks outside.  Aside from the fun of the experiment it accomplishes exactly nothing.

...and with the computers doing the trading and all..well, you can't tell if the market will crash 1000 points or ramp up 300 in one day.  What a joke this country has become.   

Wed, 10/27/2010 - 11:50 | 680635 SheepDog-One
SheepDog-One's picture

Yea Bernanke and Geithner kinda remind me of retarded kids playing with blocks too, and all thats needed is a bigger hammer to get that square peg in the round hole. 

Wed, 10/27/2010 - 11:55 | 680647 treemagnet
treemagnet's picture

Sheep dog - I'm thinkin your way.  Even POMO's don't float in the air like they used to.  Smart money is trolling for the Harry's of the world.  Now remember, don't let Harry get in your head like the other day - remember what John Wayne said, "you've done nothing when you've bested a fool".

Wed, 10/27/2010 - 11:58 | 680658 SheepDog-One
SheepDog-One's picture

LOL, I think at most all theyre hoping for is to catch a few retail longs triple reverse sentimenting themselves into going all-in at the top.

Wed, 10/27/2010 - 12:16 | 680718 MeTarzanUjane
MeTarzanUjane's picture

How is gold doing today? I can't get to my computer to check...

Let me know, OK?

Wed, 10/27/2010 - 14:21 | 681056 Questionmark
Questionmark's picture

1324.10 as of now. Down 1.23%

Wed, 10/27/2010 - 13:00 | 680843 knukles
knukles's picture

I thought that Waddell had agreed to break up the sell order into 2x5 blocks?  Takes care of the problem, no?

Wed, 10/27/2010 - 14:46 | 681129 Downtoolong
Downtoolong's picture

Well, with the DOW down 100+ for most of the day, this post is starting to look like a good call.

 

As for the heavily defended benefits of HFT liquidity, I’d like to point out how the bid/ask spread on a UAL DEC 2010 call option with a 25 strike has once again blown out wider than Pam Anderson’s pooty to $0.85. That’s over 15% of the midpoint value.

 

HFT is liquidity for the chosen few,

always there when you don’t need it,

and never when you do.

Wed, 10/27/2010 - 21:06 | 682084 Buck Johnson
Buck Johnson's picture

They are taking money off the table.

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