Fractal Algo Strikes Again, This Time Impacts Popular Bond Bear ETF TBT

Tyler Durden's picture

After previously testing its mettle in such markets as Natural Gas and Crude Oil, the fractal algo, just like the StuxNet virus, is now ready to progress to its real test: equity products, and specifically ETFs. Courtesy of Nanex' sharp eyes (and extremely complicated market scanners), today we have the first official spotting of the fractal algo moving away from commodities and into extremely popular ETFs, in this case the bearish bond synthetic CDS better known as the TBT. The pattern below is quite unmistakeable. It is quite amazing that just one algorithm can override the entire market and determine the trading pattern of some as hugely popular as an ETF which most hold. We expect that very shortly, we will be observing daily fractal patterns in that most liquid and traded product of all- the SPY, as the market proceeds to become nothing more than a real life version of Nuke-em Duke-em robots.

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Larry Darrell's picture

Self aware and moving toward its final destination?

 Gotta love a move of 1.5% in 2 seconds.

slaughterer's picture

When fractally-trading algos get to the SPY, best to just go 300% into gold and move to a Phillipines island.   

Long-John-Silver's picture

Make sure that Philippine island is free of Muslims.

 

 

Sudden Debt's picture

Tyler,

You optician must make a fortune on you! Aren't you nearly blind from watching charts like this all day?

 

etrader's picture

The  ‘the disruptor‘ *is active in the ES again.

There's also rumours abound the out come of the chairmans "normal" meeting  at the whitehouse today

 (Nanex via our friends at ft-alpha)

http://ftalphaville.ft.com/blog/2011/08/08/646276/hft-is-killing-the-emi...

etrader's picture

Just sweeping the book

( DP)

LoneStarHog's picture

Tyler, that is Rock'em Sock'em Robots

mayhem_korner's picture

"Nukem & dukem":

http://www.youtube.com/watch?v=OmSSVt7Mfkk

Ahhh...the nuggets of Robocop and other 1980s obscurities.

 

Falkor's picture

Ok. So how to trade them? Also need some info abt this algo and other algos. any site? 

 

Thanks 

slaughterer's picture

Check out Nanex.  The algo's nickname is "THE DISRUPTOR"

karzai_luver's picture

got robot.................

 

How to trade them.!!!!!!!!!!!!!!!!!!!!ahahahahahahaa

slaughterer's picture

By the time you develop a system to profitably trade them, you will be in prison, unless your legal department has a very large budget.

mickeyman's picture

A curious game . . .  the only way to win is not to play.

ZippyDooDah's picture

@Falkor--

 

Buddy, brother, old pal---you gotta be kidding!

drink or die's picture

Cramer was on the Today show again this morning telling people to buy and hold stocks, even though the robots may drive prices down temporarily.  He wouldn't be on TV if he didn't know what he was doing, right?  Right??

LoneStarHog's picture

If you were running a whore house, would you hire virgins?

Long-John-Silver's picture

Everyone of them is a virgin, just ask them.

Jason_1sandal's picture

Only for the extremely wealthy....

Sudden Debt's picture

who would want a virgin?

It would be like going to a financial expert for financial advice who never actually looked into the stuff he's pushing.

Who would pay for that?

 

DormRoom's picture

I heard the Chinese developed it.  It's what pushed the ASX from -4% to +1% on Tuesday. And the S&P up 4% yesterday.

TruthInSunshine's picture

Pretty soon:

Dave Bowman: Hello, HAL. Do you read me, HAL?
HAL: Affirmative, Dave. I read you.
Dave Bowman: Buy interventionist lot of SPY, HAL.
HAL: I'm sorry, Dave. I'm afraid I can't do that.
Dave Bowman: What's the problem?
HAL: I think you know what the problem is just as well as I do.

 

Bob's picture

LOL. The final scene of Fight Club set to also sprach zarathustra.  The 1812 Overture scene in V for Vendetta.  Epic.

Dave will be wishing for a black hole to lose himself in. 

wandstrasse's picture

BTW, Dave and his colleague were the first owners of iPads. Just do not know if the year was 1969 or 2001.

mkkby's picture

Fine.  Is there a way humans can exploit their weaknesses?

I did it by Occident's picture

Wait, now I'm confused, I thought PMs were good for werewolves and various undead, not for robots. 

ReactionToClosedMinds's picture

cripes ... I thought The Matrix was just a movie and the Warchowski bros. were nuts ... maybe not

 

 

Morpheus?! ...help

Sudden Debt's picture

SHIT! THEY ARE RESETTING THE MATRIX! YOU NOTICE WHEN YOU GET THESE FLASHBACKS AND FOR ME IT'S LIKE 2007 ALL OVER AGAIN!

Madcow's picture

Any fool who "invests" in the US Markets deserves what is coming to them -

 

 

Bam_Man's picture

US Markets

These are "markets" in name only.

They are hyper-leveraged derivatives casinos, which doesn't sound quite as friendly.

jowenchrist's picture

Gimme a 100 on "dont pass" !

antidisestablishmentarianismishness's picture

Looks to be a picture of the perennial bond bears jumping out the window and bouncing off the concrete.  I guess they thought the "trade of the century" was going to be easy money.

wandstrasse's picture

Looking at Nanex charts is safe with most medications...

mess nonster's picture

If algos take over, and have the potential to crush any sentient being's foolishness to make trades, who controls the algos? I mean, what do they use as feedback, and if it's their own trades, how does (or will) that feedback loop start to magnify itself, and cause huge disruptions and bizarre swings? I ask because underlying any kind of machine's design are basic assumptions. (Ex: basic assumption behind nuclear power- "We are Gods and can control anything with enough engineering!"). In the case of trading algos, is the assumption one of a continuous, infinitely expanding economy, or one that today's system in inherently unsustainable?  If the former, then algos will be inherently bullish, and propel the markets into realms where they are supported by nothing- algos as giant helium tanks for inflating bubbles. If the latter, then they will collapse the markets faster than mere humas would. If algos are neutral, then they have feedback filters to screen out machine trades, and respond only to human decisions... in which case, we're fucked. Final analysis: algos are nothing more than entertainment... just like Cramer.

I don't know shit about algos... just wonderin'...

Kobe Beef's picture

In an algos vs. algos market, a machine sort of natural selection will kick in. The most profitable algos, naturally will engulf & consume their less profitable competitiors over time. Much the same as competition & selection occurs in business today.

Of course, machine iterations of conflict & outcome occur far faster than in Local Human Conscious Time. This is where it gets interesting. It took carbon-based life approximately 3.7 billion years to evolve from photosynthetic prokaryotes to modern eukaryotic life (such as people). How fast could evolution occur in Machine Time?

So, to any computer scientists out there..

Do the Algos evolve? Are they recursive? Can a program write another program?

 

Cheers,

Beef

auric1234's picture

Do the Algos evolve?

Algorithms can be designed to evolve, but within limits. Think of it more like self-calibration mechanism than "becoming a different algorithm". Everything that changes in the algorithm has to be accounted for in the initial design.

Are they recursive?

Sorry, I don't understand your question. Recursion is just a programming technique. You would typically use recursion, for example, if you wanted to calculate the Fibonacci series, or solve the Tower of Hanoi problem. It is often useful, though always avoidable.

Can a program write another program?

Yes, but again within limits. It is fundamentally impossible (at least in this Universe) for an automated process to tell if an arbitrary program will yield the expected results, or even yield any result at all. The groundwork for this was done by Allan Turing in 1936. Read on the "Halting problem" if you want to know more.

 

auric1234's picture

If you want to see evolving "algorithms", you might also be interested in reading about Conway's Game of Life. It's crucial to note, however, that a Life machine is not a "computer" in the general sense (c.f. Turing-completeness). So don't expect them to be useful for stock trading.

 

TruthInSunshine's picture

Boom goes the dynamite, bitches!!!

(First time I've seen the USD near parity with the CAD in A LONG TIME, too).

Boom Goes the Dynamite

 

Bonus, just for all the Mr. Margins out there:

Mr. Margin Calling 
treadfreepress's picture

Can someone please explain this to me?  I understand the concepts of  program trading and algorithms but how do you identify this as an example of it?  What about the chart tells you that?  Thanks!

dcb's picture

 

look at the picture, it is a wave sign with the peaks and valleys ever larger. So if you have a buy stop it will hit in, then drop to a lower low, so if you have a stiop loss order it triggers that as well. by eliminating all the people trading, it then controls the market for that security. with a big drop, it usually buys and ramps up. Of course those on power have no trouble with hft and market manipulation. now, if you can find where it is trading, and get the pattern of if, you can make a killing. a few days uco and use were very strange. always hitting a higher higher high, and a lower low. you know you hit the buy stop, then plug inthe days low for  stop loss. then get knocked out of the trade, only to have it go ligher. if you owned the security before, and had a stop loss somewhere it killed that as well. it triggers the buys, notices the buy orders, then sells into others buying the security

 

Amd yes ypou are correct that for the great mazjority of people tyler does a poor job of saying what the picture means. it's not that uncommon on a most excellent site, but since i consider one of the missions of ZH to be spreading the word of how screwed up our market are, they fail sometimes. not all have the same knowledge base.

dcb's picture

 

look at the picture, it is a wave sign with the peaks and valleys ever larger. So if you have a buy stop it will hit in, then drop to a lower low, so if you have a stiop loss order it triggers that as well. by eliminating all the people trading, it then controls the market for that security. with a big drop, it usually buys and ramps up. Of course those on power have no trouble with hft and market manipulation. now, if you can find where it is trading, and get the pattern of if, you can make a killing. a few days uco and use were very strange. always hitting a higher higher high, and a lower low. you know you hit the buy stop, then plug inthe days low for  stop loss. then get knocked out of the trade, only to have it go ligher. if you owned the security before, and had a stop loss somewhere it killed that as well. it triggers the buys, notices the buy orders, then sells into others buying the security

 

Amd yes ypou are correct that for the great mazjority of people tyler does a poor job of saying what the picture means. it's not that uncommon on a most excellent site, but since i consider one of the missions of ZH to be spreading the word of how screwed up our market are, they fail sometimes. not all have the same knowledge base.

Mr Lennon Hendrix's picture

Unfortunately no one can be told what the Matrix is.  You have to see it for yourself.

jowenchrist's picture

My name is Dick - but I'm not a crook, trut me.

vast-dom's picture

TBT super buy at mid $24's! 

 

In fact, it will be the buy of a lifetime! The bond market will break and when it does this mother goes parabolic to the Nth!

sureseam's picture

It may go parabolic but the issuer may have already gone bust.  Or alternatively the financial instruments (credit default swaps etc) underpinning TBT may well not be functioning.

Folk moan about the phyical gold ETFs; frankly they are the least worst of these things.