A Closer Look At Today's German Stock Market Flash Crash

Tyler Durden's picture

While most of the US was in deep REM sleep, the Germany stock index, the DAX, had a flashback to May 2010: starting at 3:44 am EDT, in the span of 6 minutes or much faster than the gradual drop that led to the US flash crash from three years ago, the DAX went from well and solidly-bid to having zero liquidity... and dumping nearly 200 points in the process. Whether it was rumors of a (subsequently validated) rating agency downgrade, or just an algo testing its quote stuffing ability, the moves showed vividly that when the current rosy paradigm shifts abruptly and violently, all those hoping to be the first out of the door and hit the sell button, simply won't be able to do so. Because sadly there is no such thing as a free "4 year long zero volume levitation" - one must always pay the piper in the end.

Charts below from Nanex:

1. June 2013 DAX Futures Depth of Book.

Shouldn't demand increase as prices drop? Only if it is demand for physical gold it seems.


2. June 2013 eMini Futures Depth of Book.

eMini basically shrugs it off, DAX influence weak.

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Ray1968's picture

Well, at least gold outperformed something


Buck Johnson's picture

No wonder europe was in the red.

DaddyO's picture

So what will the chart look like at the end of the Great Keynesian crash?


Ness.'s picture

Last one out is a rotten egg!

French Frog's picture

Another one of those articles when I go 'sigh': 200 points on the Dax is nothing and it's not even the same ball game as the Dow from 2010 losing nearly 1000 points (5 times as many).

Panafrican Funktron Robot's picture

Seems to be a very effective mockery of the concept of "stops".  

zorba THE GREEK's picture

That's what happens to a country when a rating agency downgrades them.

Their markets turn into s**t.

disabledvet's picture

You are a wise man Young Grasshopper. "doesn't help when you obliterate those little island people" either. Algo's get itchy...start "plumbing the depths"...and I ain't talking depravity here.

Downtoolong's picture

Either that or Max the tech maintenance guy tripped over the electric coord.

Dr. Engali's picture

All that "wealth" vaporized in a manner of minutes, and we are supposed to trust these "markets" over holding tangible metals.

fonzannoon's picture

Doc (or anyone else) you have any guesses as to what the next stage is? The first stage was massive gold knockdown. The second stage was tremendous physical buying in response. What comes next?

Does gold bounce higher? But we just go back to that bang around phase? Does gold putz around lower and this just goes on and on? Or does something truly come unhinged somewhere?

Dr. Engali's picture

I think we are facing more volatility. We've been through plenty of bear markets ( and gold is in a bear market) and we all know bear market volatility is not a two day event. I think we will see some fake out bull runs and a further collapse before its over.

Ahmeexnal's picture

wealth was not vaporized, it was transfered.

DaddyO's picture


Exactly, just changed hands...


CURWAR2012's picture

All can not have the same claim on the stock at once. it was vaporied just like the holders of paper gold will be once supply is even more rare.

seek's picture

At this point I think the FOFOA roadmap is gaining credibility. It's been a while since I studied that in depth, but basically things muddle around and possibly go lower, except there's very low physical availability. Eventually physical becomes completely unavailable (no sellers) and the paper markets blow up, and that launches the physical price. That's where the FOFOA stuff gets really, um, interesting, with really crazy prices citied (>>10K). Setting prices aside, I think this is a reasonably forecast. The issue will be one of duration, I don't think the market could be horizontal for years, but months, possibly.

This move will definitely have shaken out (ha! faced-ripped!) anyone that that was using margin extensively. It's oversold, but only physical buyers seem to think that, and only those with deep pockets and a tolerance for pain would play paper games in this environment.

dick cheneys ghost's picture

The dollar is cornered...Ben is printing like crazy,devaluing and manipulating gold to make the dollar look better, meanwhile the Saudi's want a higher oil price to counter everything that Ben is doing with the dollar and gold...

prains's picture

cornering the rat means there's blood to be spilled, why they chose an 8 yr old boy in Boston is a fucking mystery

klockwerks's picture

Just checked the opening Asian market and gold and silver still getting hammered. Wish I could find some monster boxes but SOLD OUT is all I get. Will take your money now and we might deliver it in 30-45 days. I think not

Croesus's picture

@ Dr. Engali:

It will happen to Gold too, in my opinion. The difference though, will be the fact that stock prices can nosedive and stocks will still be available. When the "price" of Gold nosedives, real Gold will vanish.

At that point, the question will be: "How high of a number in Fiat notes does it take to bring an ounce of Gold to the market?"

The wealth transfer that will take place is almost inconceivable.

@ Fonz:

The mad scramble is getting underway! See my comments to the good Doctor above, and check these articles out, if you haven't seen them already.


Also, that piece ties in with this one, in that Gold's VIX term structure implies that something major has occurred:


And lastly, both of the above pieces tie in with this:


(H/t to another ZH reader for the last link)

It's going to be a very interesting couple of years.


seek's picture

For anyone who hasn't read it, that alhambra link is definitely worth your time to read. Surprised Tyler hasn't made it a story here.

fonzannoon's picture

I am interested to see how long we can remain in a state of price drops with a lack of supply and massive demand.

seek's picture

It's completely dependent on the supply of credible paper gold. Which is infinite until it isn't -- that's why the inventories are so important.

I had posted a few times a link to the Bloomberg graph of COMEX inventories, and last week that stopped working. However, the direct link to the CME gold inventory spreadsheet still works: http://www.cmegroup.com/delivery_reports/Gold_Stocks.xls

It's down another 100K Ounces Tuesday (report is one day delayed). It was flat Monday, but down 100K ounces on Friday. Each 100K ounces is 1% of their inventory

So as of 4/16, they're down to 9,016,113 troy ounces. On 4/8, they had 9,273,384. So COMEX inventory is down 2.8% in a week, and that's on top of about 10% going away in Feb/Mar.

The wildcard question is: how low can COMEX inventories go before the paper gold loses credibility? I think it's above zero. At this rate of inventory burn, we'll likely know within six months, and likely sooner. If Maguire's story about the LBMA going bust prior to the takedown is true, even sooner than sooner.

Croesus's picture

@ Fonzannoon:

We can stay in a state of price drops, all the way to Zero. The paper market is about controlling the price. The game changes, when there is no more physical left to buy, because those who have it won't sell, and the market can't source supply at those prices.

At that point, the paper price plunges, and one of two things happen:

a) People who have physical think they're losing, so they panic sell.

b) People who have physical know that the "price" doesn't matter, so they hang onto it.

My money's on "a" happening first, with some people firmly entrenched in the "b" camp.

When "a" happens, the tell will be what the Central banks are doing. Are they sitting back, or aggressively buying everything in sight?

I'm in the "b" camp, if it's any indication of where my thinking is.


Edit: @ Seek: I think Maguire was right. I have to wonder if that's what the big meeting at the White House was about. Of course, it's speculation on my part, but not entirely baseless, given the timing.

seek's picture

I think it's connected, but maybe not specifically about the LBMA. My guess is that someone big in the ecosystem has blown up, and there's a ripple effect on the LBMA or one or more members.

I was doing a thought experiment, and what if that player got in trouble and had loaned gold to the LBMA and then suddenly needed it back (either to liquidate or to sell to a CB or other large party) and thus didn't renew the lease. That would create a big chain reaction, similar to a bank run in the fiat world, since you'd be losing the deposit (lease) needed to drive the fractional reverve multiplier.

I think it stands to reason it's a European player (unless it's JPM, of course.) Perhaps a European player with large exposure to Cyprus or Greece, or an insurance exposure, akin to AIG. Maybe Commerzbank?

Given the meeting, I don't think we'll have to wait long to know what broke. Given the terrible leading indicators plus gold, plus this meeting, we're going to have quite the shit show in May.

fonzannoon's picture

badass stuff guys. Thanks

sumo's picture

"For anyone who hasn't read it, that alhambra link is definitely worth your time to read. Surprised Tyler hasn't made it a story here."

Yes, and yes. It is a MUST READ. Very enlightening. The "barbaric relic" serves a vital role as the global liquidity backstop. the universal collateral:

"in times of extreme stress, gold acts like a universal liquidity stopgap – when all else fails, repo gold"

No wonder the Masters of the Central Banking Universe don't want the little people to own it.


goldenbuddha454's picture

Hope the CDS Market has enough to back that 700 trillion they wrote on Germany!

Goldilocks's picture

The Beastie Boys - No Sleep Till Brooklyn
http://www.youtube.com/watch?v=07Y0cy-nvAg (4:47)

Schmuck Raker's picture


I'm not sure that's going to catch on, Tyler.

rp1's picture

This is not a flash crash!  It's the real thing!  NEW WORLD ORDER!  All the markets are crashing to adjust to the new world order.  Japan has the NEW GLOBAL RESERVE CURRENCY, and they are backed by American military might!  You're VOTING WITH YOUR MONEY, but don't vote for gold!


FIAT's picture

the nation wrecking. mammon worshipping "jew" never sleeps.

It' is a never ending vacuum cleaner 


thismarketisrigged's picture

even if the market crashes, someone is going to get rich from it, i just hope its not goldman sachs, i fucking hate them.


also, how is 200 pts considered a flash crash really?


although i was not watching it live, the DAX was prob down modestly before, so a sharp quick downward turn by another 130 pts or so is not insane or anything.


the flashcrash in 2010 in the u.s, the market dropped as much as 1000 pts in minutes, and you had individuial stocks for example like procter and gamble drop 25 dollars in less than 2 minutes or so. thats a flash crash.

chump666's picture


The ECB is running HFTs on the EUR, funded by the NY Fed right?  Hilarius trading action right now.  1.30 dip buying etc

Europe is a f*cking bad joke.  Don't worry so is America.

williambanzai7's picture

I wonder what these crashes sound like on an oscilliscope.

Dollar Bill Hiccup's picture

I'd like to know what the piper is smoking in that pipe, because whatever it is, the last four years in the market have been a long, strange, trip.