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The Huge Shift In Market Structure That Occurred Yesterday
Equity markets relatively collapsed intraday yesterday given the recent lack of volatility with the range around four times larger than the three-month average and volume at its highest in that period. While that is significant of itself, as the S&P broke its uptrend, Nanex has found a much more serious shift in the market structure that occurred yesterday. Soon after the open on the US day session, market-making HFTs surged their quote-stuffing efforts to the highest level in months. Whether this was intended to artificially inflate orders to enable institutional sell-orders to be crossed with falsely hopeful retail orders is unclear but given the order flow and direction of trade, it seems something significant changed yesterday.
On February 25, 2013, starting around 10:35, the number of quotes relative to the number of trades began surging and rocketed to levels not seen for several months. Although the levels have not come anywhere near the preposterous heights set back in August 2011 (when HFT reigned with impunity), the surge is enough to warrant extra attention. Charts below plot the ratio of quotes to trade value (similar to Quotes/Trades but in way to better compare the shifting lower transaction size since 2006). Each line shows the one-minute average value for all NMS stocks (about 8,000) for each minute of one trading day (9:30 to 16:00 ET), color coded by age: older dates towards the violet end of the spectrum, while recent days are colored towards the red end. The thick red line is Feb 25, 2013: note the surge doesn't start until about 10:35.
A total of 764,962,237,673 quotes and 43,688,052,096 trades were processed to create Chart 2.
1. Quotes per $10K of stock traded. One-minute average from Jan 2013 through Feb 25, 2013 for every minute of the trading day. Red line is Feb 25, 2013.
Things are normal until about 10:35am, when quote spamming surging.
2. Same as chart above, but showing from Jan 2007 through Feb 25, 2013
Excessive quote traffic has been on the decline. Though the surge on Feb 25th stood out in stark contrast to recent trading, it is still way below the crazy days of August 2011, when HFT reigned with impunity.
3. SPY 30-Minute OHLC bar chart. Red Arrow indicates when the surge in quotes began.
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There's a disturbance in the universe...
The HFTs were probably just providing liquidity for the retail buyers taking part in the great rotation. Someone has to fill all those market buy orders for FB and AAPL!
/sarc
Zerohedge is now a scientific blog??? This is some huge solar flare!
Looks like the Nanex has been using the SUCK KUT too...
Can't Nanex identify who did that?
Waddell & Reed
Ha Ha, their ES hedges dominate
No - but the Exchanges can.....
Hemmeroid flare up.
I think I've found a way through the HFT/ Algo investment chaos.
Other than buying additional PMs: Gold, Silver, Lead, Brass;
I am confining my investment strategy to Old Crow bourbon.
It is surprisingly smooth, for its moderately cheap price.
I feel quite good about all those charts!
I am still long ammo, gardens, and booze.
Well . . . armed with ammo, gardens, AND booze, you may want to consider adding bandaids & torniquets to the mix, or a coordination lock for the whiskey box.
Just turn it off, wait 10 seconds, then turn it back on...that's what my IT guys always tell me...
Don't forget to clear out your cookies too. It's always the cookies
Aurora Borealis...
aurora bernanQE-olis
Oops my bad.
Hey... you sound like the Chairman of the IPCC.
Breaking Global Warming news... (and it's worse than we thought! :)
http://www.thegwpf.org/ipcc-head-pachauri-acknowledges-global-warming-st...
Meanwhile last summer there was record heat and drought in Texas almost as bad as the 1930's.
https://www2.ucar.edu/atmosnews/opinion/8349/dust-bowl-vs-2012
Yesterday record snowfall in the Texas panhandle beats the last record during the dustbowl in 1934.
http://www.dallasnews.com/news/state/headlines/20130226-texas-panhandle-...
There is absolutely nothing blackswannish about the term "dust bowl" especially as it possibly applies to a formerly-industrialized military superpower that has outsourced production, exported its gold, impeded the tapping of resources, taxed and harried its citizens, practices fractional reserve banking, disrupts its currency supply in spite world reserve status, and leans heavily on expensive agricultural exports generated by vast, flat grassy regions that are prone to 100-year climate disasters like drought, dustbowl, and flood.
Absolutely nothing blackswannish, whatsoever, whatsohaveyou.
I heard Goldman was busy buying uncovered crop insurance on farms in the south-west in the form of CDS's (Corn Disaster Swaps).
I expect thay will be hedging with purchases of physical napalm in the commodites market just to be on the safe side...
'God's Work' you know...
AHAHAH What a douche.
This I would believe :P
That's a nasty island/gap to be filled down there around SPY $143 folks.
Benny has this. He's got the spackle to patch it and a high volume printing device with a fleet of HFT's to do it.
I predicted 2/27/13 ~ give or take...
~~~
http://www.zerohedge.com/news/2013-02-23/380-scariest-number-bulls#comment-3270397
.
What about this chart?
http://www.insidertrade.net/wp-content/uploads/2013/02/InsiderSellBuyRatioFebruary222013.jpg
Not time yet CPL? Thinking about backing up the truck right about.... now
Sell em' hard. I'll probably be selling some soon too, but I've still got some silver to accumulate first.
And duct tape & baling wire & epoxy too. Too bad he doesn't know how to fix anything....
I'm pretty sure he's figured out how to fix the "markets."
14 minutes & 59 seconds... ON THE NOSE!
Nothing a little SPY 80 point flash crash can't fix.
Island formation I believe, the downtrend ended with 80% probability. just guessing.
It would be nice if pictures could give some guess as to the significance or impact of these changes. Meaning, so what, what does it mean, why should I be concerned
It means the ride could get very exciting from right about >here<.
<Please bring your seat and tray table back to their upright position and fasten your seat belt. Then kiss your assets goodbye.> :)
90% of all trades are machine stuffing now. Means Bullish. Hyperinflationary type of bullish.
You'll take whatever kind of bullish they give you -- and you'll like it.
I'm pretty sure it was someone on E-Trade trying to buy 4 shares of AAPL, whose enter key got stuck upon execution.
Perception Deception continues unabated except for ZH
No wonder the economy and the stock market is all fucked up...solar flares (whch, of course, affect the weather).
Those charts look like the Genesis Weapon from Star Trek terraforming an alien planet.
Except we're not an alien planet. But yeah, we're being transformed. Kinda sucks actually.
Good point, now I'm depressed again.
Know what I do when I'm depressed by algos terraforming the economic landscape? I stack tits.
In that case you might be ready for some of my alternative reality:
http://madscienceunlimited.com/fiction/theexchange.html
See if you can stack any of that, son.
"terrorforming"
Beam me anywhere, Scottie!
Must....Save....Equities.
I'm sure someone will come along shortly and explain why Nanex is wrong without actually providing any data.
i sense a great disturbance in the farce
The farce has farted and look what came out: Bernanke!
the farce is with us
Dont be depressed boys and girls. This was destined to happen. The greatest market crash in the history of the world is coming. We cant stop it. All we can do is prepare. We are prepared much more then most. So sit back with a brewskie or a pepsi and enjoy the fruits of your labor. There still is plenty of time. You are witnessing something quite historical. Speaking of which. . .
'It IS the best of times, It IS the worst of times.'
"I have not begun to fight." - Bernanke
<Or his successor.>
I'm ready for the future of trading: a can of beef stew in exchange a roll in the hay with a less prepared individual's wife.
Sales happen. This was a lot of sales. We'll be back buying in 3-4 months (or years)....
Yesterday, SPY March 16 150 calls broke below 2.20 and OI increased by 60k. this strike appears to have been the anchor to all trades since Jan. They even whipped these calls all the way to 3.70 and 3.30 without the slightest drop in OI until yesterday.
Yesterday there was a clear deterioration in the market. Technically, we can speak of a correction process enough to pull down Wall Street between 5 and 8%. However, it is likely that Ben and his friends try to "calm" the markets. This can be through a statement to the media, an injection of liquidity or a combination of both.
"The Huge Shift In Market Structure That Occurred Yesterday"
"The Huge Shaft In Market Structure That Occurred Yesterday"There - fixed it for you.
At first, I thought that was an infra-red photograph of the Sun's corona.
4 independent volume readings show the odds favor declining prices in the near future. Any way you cut it, volume is short term bearish:
1. We have had six bearish days in a row.2. Don’t forget the “volume of the top” reversal bar of 02/20/2013. More about it here: http://www.dowtheoryinvestment.com/2013/02/dow-theory-update-for-feb-21-...
3. The trend line of volume was not supportive of the last stage of the rally and, conversely, it has been supportive of declining prices.
4. Yesterday's volume was significantly larger than that saw on 02/04/2013 (last minor low).
The Shift has Hit The Fan?
Yup:
https://www.youtube.com/watch?v=aZdp46Jen_w
The US stock market is a fraud! There is no other way to say it, it is courrpted by computerized trading, printed money and overall courrption. I will never own a stock in any US company as long as I live.
Did you just start reading ZH yesterday?
Fresh meat.
What is the problem with market participants demanding huge volumes of quotes?
When I trade I always demand a stream a quotes so that I can see the real liquidity at touch on both sides of the book.
When there are lots of quotes being demanded it usually means that someone is deeply concerned about the price impact of their actions.
That is to say, they will not want to sell more than the volume at touch on their next order as they do not want the market to tick lower.
This NANEX data, shows that the trades going through the market on 25th were trades from institutions with very large holdings, holdings so large that they cannot be liquidated without causing significant price impact.
The quote/trade ratio explodes when these institutions attempt to reduce the price impact of their actions.
It is a good thing. It always for a less volatile market.
If anybody wants to discuss the finer points of HFT methods and market microstructure then meet me outside the saloon at high noon.
I bought a new shovel today....
It works GREAT for digging holes.
Random_Robert is random.
Solar flare!
I can never figure out how to make 2 cents with that nanex stuff.
You?