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Stock Market Fragility Fast Approaching "Flash Crash" Levels
This past Friday, on the 25th anniversary of Black Monday, Bill Gross warned that in the current centrally-planned market "central bank puts" are the modern day equivalent of "portfolio insurance", and he is right. By sending complacency to record levels, and essentially forcing investors to no longer worry, hedge and generally ignore tail risk, the central planners, in their futile attempts to reflate stocks at all costs, are guaranteeing that the market will experience just the type of fat tail event they promise will never occur. As for the catalyst that will make sure of it is none other than our old friend: high frequency trading. Because while central planning is the mechanism by which investing is dragged away from mean reversion, price clearing and fair value discovery, it is HFT that is Bernanke's analogue in the millisecond trading world (as all those who had stop limit orders (that did not get DKed) on May 6, 2010 very well remember). Because when the next Black ___day does happen, it will be due to central planning, but it will be enacted courtesy of HFT (which will never go away until the next and probably final market crash: too much exchange revenue depends on the perpetuation of this parasitic liquidity drain).
Which is why it is only appropriate to warn readers that when it comes to system market fragility, at least according to Nanex, whose work ZH first presented nearly two years ago and has since gone mainstream now that HFT is the universal scapegoat of even such legacy media venues as CNBC (it is always better to bash the vacuum tubes than the people who profit, or those who have made a mockery of the stock market - it is not like anything will change anyway), the frequency and magnitude of "wild price spike" events (to put it simply) are now both rising at an exponential rate, and fast approaching Flash Crash levels.
From Nanex:
Below is a chart showing the daily counts for all NMS stocks of prices that exceeding NxCore filter level 6. Filter levels range from 2 (lowest) to 7 (highest). Stock prices flagged at these levels are almost always canceled or corrected by the exchange later in the trading session. The chart below indicates that wild price spikes are happening with greater frequency and magnitude. The highest peak on the right side of the chart is from the October 9, 2012 "Mini-Knight" event.
1. Daily Count of NMS Stocks with Prices Exceeding NxCore Filter Level 6 Since the Flash Crash.
The Flash Crash had 1,361 of these events, which would skew the scale.
Remember: with just two months left until the Fiscal Cliff deadline, and Congress not one picometer closer to a compromise resolution, there are just two catalysts which can get the House to cross the aisle and do what is in this nation's interest: i) a "rally behind the flag" war (which is certainly an option), or ii) a massive market crash that wakes everyone from their "the Chairman will get to work and fix everything" stupor and forces the cliff to be resolved or else everyone's political career will be cut short.
So keep a close eye on the Nanex core feed and abnormal market activity. At this rate, the next wholesale stock market flash crash can not be too far away...
P.S. for those curious about macroeconomic implications of systemic instability and macro stress tresholds, we urge re-reading ""Trade-Off": A Study In Global Systemic Collapse" - because in today's 'just in time' world, an "equilibrium phase shift" is always just at most minutes away, and no, you cant hedge 'after' the event.
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I'm hoping for a bloodbath tomorrow...
There will be blood -for the NasdApple, and the Goog. Gold and silver will be an illusionary crash.
I'm looking for an opportunity to convert my VIX calls into bricks of silver.
farmland is getting interesting too..
Farmland has been getting interesting for quite some time now. Fresh water will be next.
(Hijacking top of the thread for a moment)
Just gotta say, nice catch Nikkei...you almost let it get away...butter fingers ;-)
hope for the status quo still reigns
Print & carrion...I mean carry on ;-)
Homeland season 2 is becoming interesting too... oh right markets.
I'm looking for an opportunity to sell my 1st born for some more silver.
(Wait, did I say that outloud)
You did, and I respect the hell out of you for it.
You can always have more kids. As long as you stay out of China.
The recent, and surprising, top-line revenue misses, along with Friday's 12 month chart-uptrend breaks led by NDX, tell me we're facing a possible Oct. 1987 repeat collapse, in which AU may well be also taken out behind the barn, but TD's July 2011 best-chart-ever tells me that gold is really tracking the 12 year old, probably-never-ending upward spiral in the u.s. debt limit, and, inversely, the evaporating value of sovereign debt worldwide, but waduino:
http://www.zerohedge.com/article/gold-rise-143-trillion-us-debt-limit-increase-%E2%80%93-bloomberg-chart-day
http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=ndx&insttype=&freq=1&show=&time=8
Its all about the $SPX 50 and 200 Month Moving Average crossing. The spread is 4 points. One year ago . . . 60 S&P points. Time to let loose the hounds.
you are gonna lose big with vix calls , are you a kamikazee?
Why not, bring it on!
I am "armed" with short positions of all kinds.
i am too although i think when the shit really hits the casino is not going to pay
Sell short, get your money first! Then let the casino wonder if YOU will pay THEM when you cover...
another vxx kamikazee.
@ The Shootist
Barron's would be taken much by surprise if so...
I agree with you re Au and Ag. "Review of Barron's -- Dated 22 October 2012":
http://tinyurl.com/8c2rjxh
sorry, no blood bath..
If the DOW dropped 1000 points in one day again, me thinks CNBS et al would consider it a Pearl Harbor-like event.
Nah, the Germans would never bomb us again.
"Fat, drunk, and stupid is no way to go through life, Mr. Summers."
You boys playin cards?
Yea, CaddyShack was a great movie.
Enough is enough. Time to Take Out the trash...
Must-read latest essay from JB Campbell: Extremism Online
Civil WarCampbell was interviewed earlier today on RBN by Dr. Rebecca Carley, hear it commerical-free here:
ZIONIST OCCUPIED US GOVERNMENT with guest JB Campbell
I could not agree more emphatically. In fact, it sounds like JB and Vidrebel maybe brothers from another mother as their strategies are nearly identical.
http://vidrebel.wordpress.com/2012/09/03/weighing-the-options-everything-else-is-worse-than-a-us-military-coup/
The fear bots always call me out when I mention the coming MASS ARRESTS. However I believe in a Constitutionally-legitimate civilian coup, not a military one... http://tinyurl.com/cd5cyjo/
-1, FEMA camp FAIL
Hey what a great way to solve America's problems...a military coup. What a great idea. Why didn't I think of that? What could go wrong?
Awesome, ABR.....made hard copy.
Check this out http://www.scribd.com/doc/8634450/Germany-and-the-Jews-by-Benjamin-H-Fre...
You can get your money down right now ES at 1422 (-2.00)
Why do I get the feeling there is a fat finger out there that doesn't want Obama re elected?
I sure as hell don't want O'bomb-a to be re-elected. Trouble is, I don't want Ro-money either.
What a great post. Thank you Tyler.
That really did sum it up.
I went XtraBullish on the VIX on October 5th at 14.
XtraBullish: I've seen the VIX data before and didn't realize this was a possible stock. So dumb question, even if stocks fall in a crash which creates volatility does the VIX price go up?
How the VIX works
Google, its not just a pretty face.
Yeah it's called Google and its on the internet. It is amazing.
The internet: more than just a series of tubes.
Nice article Tyler.
Once upon a time, when I had more money than brains, I traded commodities & day traded stocks. It was really, really funny how a stop I had would get hit exactly then go the other way 2 seconds later.
If you need the market to live you better know what the f*ck you're doing or have the luck of the Irish with you. O, wait...
so now you have less money and more brains , how usefull.
For a long time now I have been expecting a planned crisis, an October surprise if you will, that would shake the worlds financial centers. The HFT could easily manage that and by the time you would get up in the morning a "crisis" would already be declared by "O". Hope I am very wrong but it would be so easy to pull off, not to defeat but retain the current administration. As many ZH readers have stated many times, the whole worlds finances are on the edge and would take but a small nudge to go over the cliff. When something effects the econmy that large it would effect every single individual. Very sad when the whole of our economy is hanging by a thread which an individual or group could cut and it would fall in mere seconds thus satisfying their agenda in full. It's all about timing so think back to Oct of 08, SURPRISE!
Catch 'em leaning. If it can topple a fishing boat, it can topple any system that does something to excess.
Analyse failures in history. Too much debt, too little food, too much expansion or domination, too much debased currency, too little water, too close to volcano, too trusting of presumed allies, armies too far from home, too far below sea level, too far behind technological developments, too trusting of engineering worst case scenarios (actually politically-based worst case calculations), or enemies too willing to dig in and wait it out.
All a planned crisis gets one is relected into a bad economy with a new crisis - not the best possible action. Alternatively, a $9 million book deal, benefits for life, and hitting the lecture circuit are not altogether undesirable elements of a plan B.
Grid, good response and I have thought about that same thing. The assumption here would be that one would consider the "good life" over absolute control and power. I don't think it's about one idividual but rather a "group" attaining that total agenda controling all things. Maybe the "one" moves on but the group maintains the power and control over all things. The good lfe would appeal to almost everyone but everyone is not looking for complete control. Penetta has twice given speeches in the last 2 weeks about how vulnerable we are as a nation to computer hacking and included banking, water, stock market etc. These terrible people in wherever, could do great harm. Is it a warning of things to come or "don't look at me I warned you". I'm not paranoid just listen closely and use 68 years of common sense. Something seems to be rotten in Denmark!
It's almost as if a civilization comes along with a deathwish hard wired into them.
Precisely why ZH references to Fight Club are so relevant. I wouldn't call it a deathwish, but we do seem to be hard-wired with the same base instincts our ancesters had 10,000 years ago and we just can't seem to shake them.
As a human race, we have tamed this earth to the point that all six billion of us could live pretty safe, free, and well-fed.
Part of us can get along in the workaday world, but that unconscious part always seeks more. More money, more prestige, or simply the need to affect our surroundings beyond just choosing new kitchen cabinetry and paint colors.
We can try to live within our public ego structure, but our unconscious id will eventually make us want to test ourselves, for celebration and camaraderie, if nothing else.
This often dormant drive is wonderful when it results in mapping an entire genome or remotely probing an uninhabitable planet millions of miles away.
Those base human drives and urges can be much less supportive of the greater good when they result in central bankers with an unyielding need to be proven correct, or a leader moving toward socialism while at the same time reserving for themself the power to suspend core rights of citizenship.
On a long enough scale, none of us makes it, but we all want to make it as far as we can on our own terms, which is about all we can hope for within the constraints of a few simple rules.
"Very sad when the whole of our economy is hanging by a thread"
yes, but
"it would fall in mere seconds thus satisfying their agenda in full."
they have a distaste for chaos, are certainly not ready to induce it, and the backstops are in place for now.
Keep in mind, "they" is a loosely connected, symbiotic mess of the self-absorbed -- they suck at planning anything.
But they are, appropriately, quaking in their boots.
What they fear most -- and naturally recognize first -- is that their Self-Propelled illusion is finally exposed to the world as a farce.
They are in self-protection mode -- there is no planned crash.
+1 I could see that happening. What a white wash that investigation was and wasn't it convenient that the banks backed obama at that time and none of them have been prosecuted. I still believe that creepy evil soros had something to do with that he's a convicted felon who has manipulated the markets. He paid a record fine for doing so in Hungary. I wouldn't put it past the bailed out buffet either.
Aug. 14, 2012
Hedge fund Soros Funds has filed his quarter 13-F report with the SEC.
According to the report, Soros completely dumped his stakes in Citigroup (420,000 shares),JP Morgan (701,400 shares) and Goldman Sachs (120,000 shares), leaving him with no position in any major financials at all.
Soros Gold Action Speaks Louder Than Trumpeted 'Bubble' WordsWhen you see Mutual Funds selling stocks due to redemptions requests for 30 something months in row, ask the question:
Who is buying?
The answer is: The ones who have access to infinite money
Who are they?
The answer is: Primary Dealers
A Pyramid Scheme relies on NEWCOMERS. Not only there are no newcomers (suckers), but the supposed newcomers are selling and selling and selling for 30+ months in a row. Hence Primary Dealers are the suckers.
Same as in 2008 when the decision was made that Lehman will be the sucker amongst primary dealers, I am thinking right now CEOs of the WEAKEST primary dealers are playing poker. The loser will take the blame for the inevitable market crater. However, the way I see it, they will always try to blame it on China.
I bet that MS is going down, but C could be the one.
cnbshit was laughing their ass off on Friday as they all admitted they had no clue who was actually in this market...
CNBC what are they good for absolutely nothing
“You read about traders that aren’t trading. So who’s making the volume? Is it the plunge protection team? The government’s manipulating it? We don’t have any answers to that,” said Yamada.
http://www.cnbc.com/id/49434576
‘Flash Crash’ Reforms Will Fail to Make Markets Safer, Study Claims
http://hereisthecity.com/2012/10/20/flash-crash-reforms-will-fail-to-make-markets-safer-study-claims/
As Black Monday Turns 25, Risk of Similar Crash Persists
http://www.advancedtrading.com/as-black-monday-turns-25-risk-of-similar/240009446
more good reads Lori, thanks
"The challenge today is to find the right tools, so that when the system is shocked, it can be steadied again."Adv.Trading
“God has mercifully ordered that the human brain works slowly; first the blow, hours afterwards the bruise.”
I was struck by another indicator that we are approaching a currency collapse today. Look at all the pro atheletes and entertainment schmucks like Justin Bieber who are being paid millions and millions of dollars to toss a ball through a hoop or sing incoherent douche songs.
Never before have societies and economies afforded such retard bubbles.
You know that China is a primary dealer now......
Correct. Thx for bringing it up.
I meant US Based primary dealers. Exclude foreign ones.
As to China, I read somewhere that they can only BUY direct, but they can't sell direct. They have to use one PD for that. I can't prove it. I think it was Martin Armstrong who wrote it, not sure.
for treasuries, not equities...
Wow. I never thought about this.
Are you implying that PBOC is buying S&P?
If that's the case, that's the ultimate sucker.
It's unfathomable. Chinese are not that stupid, but you never know.
is it really that crazy for the chinese to own Eli Lilly, Pfizer etc? could actually make sense.
The Chinese might as well own Lilly and Pfizer. That's where all the pharma jobs are going. And they will steal the intellectual property anyway.
Maybe that's why they have all those Ghost Towns in China with Western architcture and streets...and stuff.
Maybe they sold all their T-bills and bought Gold ? Isn't Aussie export of Gold up 900% for 2012 to China.
2012...what a boring year !
Lack of volume/participation is bullish in the new normal. No interest or demand but prices go up, thump up your ass head in the sand = bright and bullish.
Here is a good piece from BBG. http://www.bloomberg.com/news/2012-10-21/worst-carry-trades-show-central...
From your link:
Average daily volume in foreign exchange fell 39 percent in September from a year earlier, according to data from ICAP Plc’s EBS trading platform. That’s also harming currency managers’ efforts to boost returns.
Wow, wow, wow.
i have a weird feeling it's going to be a big insurance company that takes this bitch down. they are trying to hedge their ass off all over the place. currencies, interest rates etc. one of them is going to get it wrong.
I agree that's a strong possibility. Insurance companies can't sell off product lines or reduce benefits quick enough. They are all in a scramble to raise cash. It seems like they are filing every quarter for a benefit reduction their products.
if just one of those companies renegs on their promises and does not get bailed out they all go down.
That's why they will prop each other up. Hartford recently sold it's " good book " of annuity business. and they kept the crap side of the book. A a couple of months ago we had a Hartford wholesaler representing the life insurance side come in to tell us the benefit of their product. At the end of the meeting he then went on to tell us that Harford was selling the life side of the business and they currently had two bidders. But he assured us that everything would be okay and if we sold any of his product all the "guarrantees" would be honored by the next company. At least we got a free lunch along with the stand up comedy.
I wonder Doc...you see Pru buying billons in Pensions off GM and Verizon lately? I think that they are quickly trying to get into TBTF mode. Get a nice Citi type bailout and save their own ass. I wonder if a foreign owned insurer bites it. The US leaves em hanging and it causes total panic. But I may be overthinking it.
I don't think you're overthinking it at all. I haven't seen insurance companies scrambling like this since 08. Even to the point where the wholesalers are talking openly about it at the meetings. One other topic that has started coming up again it they are talking about the longevity and "strength" of their companies. They don't talk lilt that unless they know things aren't right.
Hey by the way OT but a tech buddy of mine keeps telling me to watch a documentary called "surviving progress". Not sure if you have seen it. I think it's available on netflix.
Thx. I'll check it out tonight if the Steelers start to blow this game.
ha in that case i hope u watch it tomorrow
Euro at 1.30 makes absolutely no sense regardless of how much Bernanke has destroyed our dollar lately. The whole broad market is just one large cluster of lies upon lies.
33 Liberty is pulling an Al Haig tonight - "I am in control - now - and will report to the media in the morning." This market is ready to "roll" and the only "rock" will be the PPT and the WGOCM's feverishly right-clicking to make sure the E/S is UP when London opens at 3 a.m. EST. I was also "there" in October 1987 and this "feels" much the same so YES - I am XtraBullish - on E/S outs and especially the VIX.
Dear SEC and CFTC. Please understand that Step Function market action is not normal. Price changes of 5%-10% in less than a minute is not normal, and it is not a sign of liquidity either. It is clearly an example of HFT algos playing with themselves. And, as you well know, that's not nearly as fun to watch as other kinds of porn.
Or rather: Dear SEC and CFTC,
What the fuck do you do all day and why are we paying you to buy your food?
And CNBC can't understand why the retail investor is still on the side line. Go figure.
I hate bad algo's
You can hedge before,just load up on physical silver and wait.
It's only a matter of time.
How many people are thinking of buying metal but are going to wait too long and you won't get a do over. They will regret it forever.
Black Monday can we still call it that :)
The Investor Class Is Scared Out of Its Wits
http://www.forbes.com/sites/robertlenzner/2012/10/21/the-investor-class-is-scared-out-of-its-wits/
Black Monday for stocks as lower profits and higher taxes menace US equity outlook?
http://www.arabianmoney.net/us-dollar/2012/10/20/black-monday-for-stocks-as-lower-profits-and-higher-taxes-menace-us-equity-outlook/
Thanks LMAOLORI Good reads.;-)
"The new Congress may not repeal all these adjustments immediately as expected by over-optimistic Wall Street investors." Arabianmoney
"And assessing points to nowhere leading every single one" close to the edge
Can the crash wait until Wednesday or Thursday? We've already got a couple of black mondays, a black Tuesday, and a black Friday, how about giving some love to the other days of the week?
We need a whole new day for it!
how about black week? like that?
this is really off topic but here's Colin Farrelly
in the movie In Bruges explaining why no solution is
a good solution without the Vietnamese:
http://www.youtube.com/watch?v=qDpoKI1pVf4
Actually, the only good solution is a sock in the jaw.
3 hours into the market and silver has already gone from down 1% to up a fifth of a percent.
Volatility Is Entering The Lower Level Stocks, Here Is a Stock That Was Just Approved For Training International Pilots At There Flight School. They Are Going From No Revs To $980,000 In revs within the next 30 days. With a current float of less than 5 million shares this is going to really be a mover. Right now sitting at the 52 week low around a penny the new valuation will place them undervalued by rougly 4,000% +. Last time on just news of them applying the stock ran clise to 600%. Monday and Tuesday trading day there should be upwards of those gains and potentially even more. Here is a great Ceo interview and research report that came out just today! The community is buzzing over this stock! Opportunity is all over the market, you just need to know where to look! This group provides full transparenc and is up 2,033% for the year. Watch Tomorrow http://www.stocklegends.com/quasar-qasp/
The final act will be a scream to the top. Nonsensical RIP to steal the shorts.
Then it all blows, obumma or romney steps in and 'does what they gotta do'.
G.W and the gang will be laughing all the way to Brussels. (and Hillary will enter the chamber to consecrate the 'achievement' with Valerie and Christine)....
Almost done!
Well, okay almost done...Carrot juice of course will be served and then Bill and the guys walk in stage right.
Rumor has it that honey boo-boo might perform with Charlie as well while Madonna goes down on Ga-Ga, but that has NOT yet been confirmed.
In the end we do know that everyone gets fucked and the lizards win.
In the end we do know that many get fucked but you're going to have alot of REALLY pissed of people with sore butts wondering why they're sore and have weapons to find out why.
Got bullets?
"The people with sore butts" have been reamed so many times they can't remember what its like to have a hole that doesn't whistle whenever the wind blows across their ass cheeks.
The first paragraph was one of the best openings I've read in a long time. A pleasure to read.
I don't remember when so many people were predicting a crash in the stock market. Self-fulfilling prophecy? Far be it from me to know in advance.
NO I'm Spartacus ....
" ... because in today's 'just in time' world, an "equilibrium phase shift" is always just at most minutes away ..."
Greatest line written in any publication in the last 20 years.
inevitability (in ev' i tuh bil' uh tee) n. 1. Impossible to avoid or prevent. 2. Invariably occurring or appearing; predictable.
It's 630a EST. The Dow is up 47 points on algo bullishness. The NASDAQ100 is up 16.5 and the SP500 is up 6.25. All of Europe is in the black.
http://bullandbearmash.com/chart/big-drop-today-sp500-channel-support-br...
Another quarter of lower revenue and higher earnings - oh, wait, the internet/googlenet missed - I guess that was a silly flesh wound. It's all bullish.