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VIX "Fat Finger" Flash Crash Runs S&P Green Stops
Another day, another stock-stop-running VIX "fat-finger" flash-crash to get the S&P into confidence-inspiring green territory...
Charts: Bloomberg
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All change at the Nymex close. 45 minutes away.
Can someone a little more tolerant of market ignorance than TD please explain to me how smashing the vix influences equity prices? Looks like the vix actually eventually rebounded. So wouldn't, in this case, equities be influencing the vix right back?
makes my head hurt.
In rough terms, you can think of VIX as the expectation of future volatility, used by big players to hedge their portfolios (by buying VIX options, which go up in a market selloff, they partially hedge any market downdraft). When expecations of volatility, esp. downside volatility, go down, such as reduced chance for a rate hike and increased QE4 chance, they unwind these positions by selling the VIX, which they know will go down, and take the proceeds and plough them into equities, to avoid trailing their index bogies. Think of it as a herd of cattle all discovering water simultaneously, but using fast supercomputers to find and drink it.
You're correct in suggesting they're intertwined, and that over longer term VIX doesn't have tremendous predictive power, often just mirroring equity moves; however, traders will tell you that, on 15-min charts, sudden, big VIX moves can and do precede equity turns.
... and straight ahead until dawn ...
Makes my head hurt too.
Ok thanks! But the implication, then, is that this isn't the Fed manipulating markets (at this moment)? It is just algo's trying to make a buck.
Many here would argue for direct Fed involvement or bank 'rigging.' Though I won’t argue with the word “rigged”, may I provide a more technical explanation that is somewhat less conspiratorial, from someone who stares at each 15-min bar every day?
The chief market methodology remains ‘mean reversion’, executed by placing bands around key moving averages in all time-frames, with the 20 Daily MA being the most important. Monday’s plunge took all indices below the key Daily 20 band, but when Tuesday failed to build on the downside, and Wednesday took all indices back to, or above that lower band, the standard mean-revert play is back to the 20 DMA, so when Wed’s low basically held twice in a row, including today, big players come in huge to try for the central MA, which would be ~1940 on the S&P, not far away today.
On the other hand, if it’s still a “bear” then they’ll re-short at or slightly above the MA, as they did in mid-Sept., giving us lower interim highs and, possibly, lower lows to come. Moreover, the ‘riskier’ small-cap Russell is badly trailing its big brothers today, not exactly a sign of a new bull trend. Markets almost never plunge vertically, but sawtooth down (or up in bull trends), allowing institutional players to earn more, as a coiled string is much longer than a straight line.
The reduced rate cut likelihood and even (gasp) QE talk is enough for the MA reversion, but IMO it will take a move above mid-Sept’s retrace to get bigger bears to throw in the towel. The point is that it’s more a clever card game of the powerful, all using an insider’s deck, than a specific decision, over coffee, to ramp a bad number today. Success in getting materially above these key DMAs (20,50) is where perma-bulls will be focusing, but with many more firms pushing the other way than a year or two ago, giving bears hope. Stay tuned.
+1
As Greenspan would have said, "if you understood me, I must have misspoke." :)
Ha ha
nothing to see here...please move along
Pretty soon they'll be no one left in the market but the bots.
Nonsense, all you need to know is how smooth todays 45 degree no volume melt is after the horrid job report. Must buy stock, we are the FED, we got this and are here to help.
Precisely. They'll use Penrose stair algos.
Confidence in what? How in fuck's sake does this instill confidence in anyone?
I am all out of the "market" for years and buying things of value on an incremental basis. Enjoy watching the "market" and the slow spin down the shitter.
Robots have feelings too. Don't be so focused on humans.
New SCOTUS decision.... Robots are people too.
Confidence is all they have, thus the weakness. So funny how a Nation bent on ridiculing those of Faith in God, have built there system of finance completely on faith in Government and Corporate Oligarchs, LMAO
Other then the freaking match at work forcing me in this crap shoot, allocated to cash for years now by the way, I rather invest in boxes of nails, Seeds, Bullets, Beans and Band-aids, etc. then give my money to this scam of a "market".
Shocker. I said this morning we would be green at some point today. It's all a confidence game now - the minute people realize the emeror has no clothes this market is done. Let's not forget the 100 pip rally in USD/JPY on weak US numbers and BOJ already indicating they won't ease Tuesday
This 'market' will never be done. Even if 90% of people understand it is a con game they either have no will or power to stop it.
Just another day on the job for vixsmash.algo. Keep buying.
Let them buy. Can sell equities to them higher.
Yet again, sucks to get stopped out.... Silly Human, Trix are for the machines!
oh, i thought a moment that it was "the recovery" or "a green shoot"
Well it was, but you know how time flys around here, and pooof, it's gone.
Nice gap fill there.
The stats show small gaps fill often e.g. <8 ES handles.
And the very big gaps, say >20 ES handles, though rare, fill surprisingly at a high rate too :)
As evidenced by the awful performance of "hedge funds" late in the summer of '15,
"hedge funds" continue to sell vol en masse in hopes of generating "alpha" in the form of amped, curved beta (short vix) and collected theta.
Juiced like a fucking cucumber.
a rally was to be expected. even bear markets have wicked snap back rallies. besides, this is friday, they always pull this crap on friday. the difference is that now they NEED a rally just to get out of a hole. mark it zero. less than zero.
I think they will never stop this shitshow, going to start trading options ASAP, where is the best place to start? I want to buy the dips
TOS at TDAmeritrade; you need 25k to have a margin acct. selling puts -deep out of the money verticals-is a good place to start to learn- only on the most beloved stocks which always come back quick; always the current month. Wait for big dip; sell verical; on recovery - buy back or wait out the 30 days to expiration.
EW1 may be worth considering, (a mini S&P500 liquid weeky option). Not something I'm into.
Well done plunge protection team. You really earned your pay today.
I would sell the S&P @ 1935.
I wait for ES 1928.5 if I'm going to go against trend. ES loves to make marginal new highs on a move, then retrace part.
The 2:30 ramp could blow through 1935 like shit through a goose.
All the ammunition is spent.
When you own a printing press, you NEVER run out of ammunition.
The Visible Hand in the markets. I always suspected Adam Smith was missing something.
the 401k savers, 'suckers", those who get paid, on 1rst and 15th just donated a few billion that they'll never know about.
when the machines know when your going to buy, they make sure it's at the highs, then they sell your highs, and buy at the lows, of course we're talking seconds, or minutes, it doesn't show on your monthly, hell daily statement.
the machines have taken your gain, "profit for the month", before you can dail 1, in your 401k' administrators 800#.
Not to mention the "Operating Expense per $1000" fee which reduces your overall compounding interest over 30 years by hundreds of thousands of dollars. Nice cut.
The things you can accomplish with a printer and an unaudited Fed are simply amazing
Must say I got caught in the trap. Been a while since I fell for the head fake but I actually for the first time in a long time believed the fundamentals would rule. After all horrible NFP and likely zero reason at all to buy stocks. Low and behold in comes the machines to punish the short sellers again. This will be the last time I believe anything is real in this market. When the indexes hit whereever they are going I won't be part of the party this time. However at the same time I could care less. This has been a low volume environment for as long as I can remember so it is a fools fascade to play a game you have zero chance of winning.
The lack of participants willing to step into the ring with central banks is why I keep my pig trading account much smaller than my bull and bear trading account. The trick is to wear multiple hats. Evil CB hat and normal human hat. Keep your position sizing small on normal human hat to get it out of your system and make bank with evil CB hat.
Wow. The BTATH crowd is really slipping. Took a half-day to recognize that the bad jobs number was actually great news!
I have a dream....
When you can't anymore fixed a corrupt system characterized by sistemic widespread criminals behaviours on the whole chain (HFT, banks, regulators, Exchanges and lawmakers) because the rule has become "the cheating" and the standards "buy your impunity" the last thing you can do, you must do is a flash worldwide financial withdrawal from this insane system. the first flash withdrawal mob just to protect your savings and show them there new social uselessness ! What a dream....
VIX definitely helped, but the primary cause for stocks' bounce was USDJPY bouncing off the bottom of two channels, one of which dates back to 2012. It was a do or die moment for BoJ, and they came through big time. The charts can all be seen at:
http://pebblewriter.com/better-late-than-never-2/
On planet Fedalgo, gad news is bood news or sometimes breat news.
Well, well, well,
Here is our message to the fucking hillbilly named Zed with the fat finger.
We know you sit inside Citadel's office in Chicago, inside Goldman on 200 West St. New York and inside JPM's office blowing Jamie Dimon day in and day out.
You have been hacked boys.
Your VIX, Gold, Libor, CDS and Oil market manipulations are all recorded and coming to an end. The SEC and FBI will never do anything about your criminal ways, so we must take the matter into our own hands.
So, make sure to read this carefully and think about what you are doing.
We know who you are, we are right behind you.
Look around your cubicle fuck head. Do you see us, do you recognize us?
We even know how much money you make. Shame, Zed, not much of a soul you are selling. But that goes without mention.
At the end of the trading day, we know where you live. We have pictures of you and your family.
Your children are so cute.
But before we come for you, we have a little entertainment to make this interesting.
Read the dialogue below and see if you can guess which film this is from:
"BUTCH
You okay?
MARSELLUS: Naw man. I'm pretty fuckin' far from okay!
Long pause.
BUTCH: What now?
MARSELLUS: What now? Well let me tell you what now. I'm gonna call a couple pipe-hittin' niggers, who'll go to work on holmes here with a pair ofpliers and a blow torch. (to Zed) Hear me talkin' hillbilly boy?! I ain't through with you by a damn sight.
I'm gonna git Medieval on your ass."
Zed, one last wish, make sure to tuck the children in and sleep well tonight.
Kisses,
The Source