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The Whack-A-Mole Algo Is Back

Tyler Durden's picture


Because as we showed today on not one but two occasions, humans no longer trade the casino formerly known as the 'stock market', we were glad to see that our old friend - the Whack-A-Mole algo - is back. As the following animated chart from Nanex shows, the algorithm is one which merely cycles in a broad, 10%+ sawtooth pattern blasting out empty quotes to feel the market in a test of other algos' responsiveness, and during a period of 6000 quote blasts, executes just under 20 actual trades. We will launch a catalog of all the various algos as we see them. After all, now that nobody else is left, it makes sense to at least make the acquaintance of all those robotic parasites that are the only entities left quote stuffing each other to death all the while, in true Knightian fashion, levitate the general market higher.


And as a special bonus, here is a reminder of what happened during the "BATS crash." From IPO to death in 750 milliseconds.


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Thu, 08/09/2012 - 19:03 | 2692459 Dapper Dan
Dapper Dan's picture

The untouchables, starrring Loyd Blankcheckfiend

Reuters tweeted:

FLASH: No criminal charges against Goldman Sachs or employees for subprime deal: Justice Department
Thu, 08/09/2012 - 19:25 | 2692522 The Monkey
The Monkey's picture

We are mostly bears here, not bulls (at current prices).  For this reason, I don't see why we would complain about whack-a-mole.  Also, I'm coming to appreciate the Fed / central banks - although not for the reasons they intended.

I feel for the bulls.  It was fun.

Thu, 08/09/2012 - 19:36 | 2692538 The Monkey
The Monkey's picture

When ZeroHedge readership is down bigtime and bond spreads are narrow AND

the market is close to it's cyclical top AND

there are a lot of bulls AND

the bears have been wiped out...

THEN it's time to short with conviction.

Thu, 08/09/2012 - 19:47 | 2692563 AldousHuxley
AldousHuxley's picture

BATS that's some funny shit.

Fri, 08/10/2012 - 00:45 | 2693200 redpill
redpill's picture

Someone, right now, is writing an algo to take advantage of this algo.  Then someone will write an algo to take advantage of that algo.  At some point, if we haven't already reached it, this circus will become so absurd that humans will be chased out of the market entirely.

Fri, 08/10/2012 - 10:45 | 2694054 short-swap
short-swap's picture

I just keep coming back for the fancy charts with the pretty colors. Now if I could just find some of that stuff James Holmes is on....

Thu, 08/09/2012 - 20:06 | 2692592 Dr. Engali
Dr. Engali's picture

We are getting there. Have you noticed to the lack of commentary on each post? And the article view count is down. I'd say based on the lower numbers more and more bears are throwing in the towel.

Thu, 08/09/2012 - 20:15 | 2692655 The Monkey
The Monkey's picture

Weird metric but yes, I agree.  Shilling, who is my favorite strategist, is still calling for an eventual P/E of 10 (and I agree).  This froth market is reminiscent of Japan - not sustainable at all.

Bulls are fucked.  They may get another 1-2% out of this market, but no more.

Game over.

Thu, 08/09/2012 - 20:21 | 2692665 Dr. Engali
Dr. Engali's picture

I think we will hit a single digit PE. I'm looking for a 6 or 7. Then I'll buy hand over fist.

Stay liquid my friend.

Thu, 08/09/2012 - 20:30 | 2692688 The Monkey
The Monkey's picture

Maybe.  I would say you're safe in cash or treasuries.  Nothing else unless you want to take a 40%+ bath.


Thu, 08/09/2012 - 20:53 | 2692733 Stoploss
Stoploss's picture

Pretty little exchange..

Are you two going to drop trou now and start sucking each others cocks??


Thu, 08/09/2012 - 21:18 | 2692786 Dr. Engali
Dr. Engali's picture

I'll leave that up to you. It's seems to be on the forefront of your mind. You could probably catch up with somebody from the SEC and watch some midget tranny porn together just to heat things up.

Fri, 08/10/2012 - 01:44 | 2693285 The Monkey
The Monkey's picture

You better tighen up that stoploss asshole. Else you be sweeping floors when your 80.

Thu, 08/09/2012 - 22:33 | 2692920 slewie the pi-rat
slewie the pi-rat's picture

the politics, too?

Thu, 08/09/2012 - 19:53 | 2692576 Landrew
Landrew's picture

I don't think the typical person here is either bull or bear we tend to be logical and make money what ever and when ever there is a greater chance of profit. There is always something to buy and something to sell. I think that kind of single minded thinking locks out any chance for profits because very few people have enough money to be right if you catch the drift.

Thu, 08/09/2012 - 19:58 | 2692590 The Monkey
The Monkey's picture

Yeah.  Well put.

I like throwing a bearish comment out there now, at the top, because I would like to see the bulls come after me at this point.  Squeeze that last drops of lower entry price for the bears out of the equation.

Bulls are doomed at these prices.  Come and get us.

Thu, 08/09/2012 - 19:43 | 2692557 EscapeKey
EscapeKey's picture

There's a shock.

Does the article mention whether Goldman Sachs will countersue for slander, or just take the cash straight out of the treasury to make up for it?

Thu, 08/09/2012 - 19:58 | 2692585 RockyRacoon
RockyRacoon's picture

They will slit their own throats because a lot more of this type of action will beg for a transaction tax.   Yeah, the dreaded "T" word.   Anathema to capitalists everywhere, but is there another way to curb the enthusiasm of trading algos?  Oh!  I know.  Some more/new regulations!  Yeah, that's the ticket.  More stuff to ignore, just like the stuff being ignored now.   Oh, the humanity!   Stop me before I kill again....

Thu, 08/09/2012 - 20:19 | 2692662 nmewn
nmewn's picture

"...but is there another way to curb the enthusiasm of trading algos?"

Maybe we could put actual people back on the floor trading?

Not that I'm big on common stocks, which are essentially worthless in my view...but they seem to mean something to a lot of people.

Thu, 08/09/2012 - 20:20 | 2692666 EscapeKey
EscapeKey's picture

Hey what happened to your extra 'c'?


Thu, 08/09/2012 - 19:04 | 2692465 HelluvaEngineer
HelluvaEngineer's picture

Fuck you Atari!

Thu, 08/09/2012 - 19:04 | 2692466 holdbuysell
holdbuysell's picture

Shouldn't the SEC be looking into this kind of....never mind.

Thu, 08/09/2012 - 20:23 | 2692672 EscapeKey
EscapeKey's picture

They are currently looking into the Pornhub "buffering" issue.

Thu, 08/09/2012 - 21:07 | 2692754 Everyman
Everyman's picture

Forget the SEC.  We need to "interrupt the signals" during key times of the day, or take nodes out entirely.  This system is vulnerable, and I bet most of the techs have NO clue what they are "taking care of".  These are almost ALL microwave emitters.


Take out a tower or two, or have some mircowave scramblers.

We CAN take down skynet, even if the government canot or will not!!!


Here is the map of the lines:



Thu, 08/09/2012 - 22:44 | 2692936 bigwavedave
bigwavedave's picture

Magnets. Big fuck-off sized magnets. And a pick-up truck. 

Thu, 08/09/2012 - 23:46 | 2693082 Everyman
Everyman's picture

I was thinking of a barrett .50 and aim for the microwave emitters!!!!

Thu, 08/09/2012 - 19:05 | 2692469 chump666
chump666's picture

'cannibalization to capitulation'

HFTs gift to the market.

Thu, 08/09/2012 - 19:06 | 2692471 Xibalba
Xibalba's picture

We like to call that one the 'Gensler' 

Thu, 08/09/2012 - 19:06 | 2692472 Meesohaawnee
Meesohaawnee's picture

if your the SEC you see peter north's big limp dick in your face on that graph

Thu, 08/09/2012 - 20:13 | 2692649 DaddyO
DaddyO's picture


Bawny, Bawny is that you?


Thu, 08/09/2012 - 19:06 | 2692473 emersonreturn
emersonreturn's picture

good on ya, tylers!

Thu, 08/09/2012 - 19:08 | 2692479 Meesohaawnee
Meesohaawnee's picture

but but the jeff macke clownshow said shorts are "whiners"

Thu, 08/09/2012 - 19:09 | 2692480 printmoremoney
printmoremoney's picture

Those are perty pictures. I guess you have to really be quick and good now to be a market timer. Sharpen you pencils people.

And then stick them up your arse.

Stack real money. Electrons are not real. They are a mental game.

Thu, 08/09/2012 - 19:13 | 2692486 Zola
Zola's picture

what i dont understand is the Chinese. Especially last august/sept when gold came under attack on the day of the swiss franc devaluation and the general action in gold since. Why not just simply overwhelm the manipulators in the paper market ? Just start selling the treasuries and buying gold for delivery on the exchange. If PPT/USSA/FED/ESF... really want to dump a huge amount of paper gold, then convert a lot of your holdings and then pull the plug = game over ? Could be the issue with delivery (MFG etc...) . Quid of the the supposed chinese futures exchange ?

Thu, 08/09/2012 - 20:19 | 2692663 Antifaschistische
Antifaschistische's picture

my take Zola...because that's WAR, and the Chinese aren't there yet.  They don't need to play that card at this time.  The important thing, is that they have that card in their hand and they don't give it up.

Thu, 08/09/2012 - 19:13 | 2692489 you enjoy myself
you enjoy myself's picture

at what point is quote stuffing going to actually be banned?  this is the easiest thing in the world to clean up, and affects no one that's a legitimate market participant.  there might be some prosecutorial discretion called into play, but only after the HFT's adjust to the new enforcement threshold of what quote/cancel ratio draws scrutiny.  but if you're stuffing 6000 quotes and only executing 20 actual trades there's not even a question about your intent.  its complete insanity that there's a legal trading strategy dependant upon overwhelming the bandwidth and processing power of the NBBO. 

Thu, 08/09/2012 - 19:24 | 2692520 cougar_w
cougar_w's picture

It's not just a legal trading strategy. It's how TPTB are manipulating markets upwards. And therefore it's how they are managing perceptions regarding the health of the economy.

Absolutely everything is at stake here. HFT is the magic elixir that will get them through. The smaller the market volumns, the better this works. They can churn the same million or so trades a million times, and take prices just about anywhere they want to.

But it is all disinformation and propaganda. It ceased being a market place years ago. This will not change until the entire economy collapses and things have a chance to start over.

Thu, 08/09/2012 - 19:34 | 2692536 Meesohaawnee
Meesohaawnee's picture

awesome!! well done.! and how did they reach vapor volume?? they spent the last year terrifying every last short on the planet. stealth short ban i call it. indeed very calculated.

Thu, 08/09/2012 - 19:12 | 2692491 rdkyote
rdkyote's picture

This is such bullshit, I can't even stand it anymore.

Thu, 08/09/2012 - 19:17 | 2692507 Bear
Bear's picture

I've been watching for hours and and still not bored ... by life is now aglo with possibilities

Thu, 08/09/2012 - 19:37 | 2692541 stocktivity
stocktivity's picture

I've been saying that for months...It's all Bullshit!  JP Morgan and the boys are able to go a whole quarter without a single losing day of trading. A whole quarter of a year!

Thu, 08/09/2012 - 19:15 | 2692499 nmewn
nmewn's picture

Zee mark of Robo!

Thu, 08/09/2012 - 19:16 | 2692501 Dr. Engali
Dr. Engali's picture

I have a vision of the near future where the market doesn't move but a point here or there. Kind of like the mid day cycle , and robots will be skimming while the S&P is permanently at 1400.

Thu, 08/09/2012 - 20:08 | 2692629 you enjoy myself
you enjoy myself's picture

i track a bunch of small and mid-cap miners and its been like that for a while, from the perspective of a human staring at level II.  there's virtually no movement on the surface, despite god knows how many sub-penny millisecond trades going on underneath.  i sold a small position today where i put a limit order in at the ask - it took nearly 4 hours for it to clear, despite the price bouncing only between the 1 cent spread all day.

Thu, 08/09/2012 - 20:23 | 2692671 Dr. Engali
Dr. Engali's picture

When liquidity dries up and clearing takes that long it tells me we are close to a system collapse.

Thu, 08/09/2012 - 19:18 | 2692510 Zero Govt
Zero Govt's picture

i'm sure these algos are based on Microshite platforms're just asking for trouble aren't you?!!

Thu, 08/09/2012 - 19:19 | 2692511 Meesohaawnee
Meesohaawnee's picture

totally agree. sometimes i have to walk away. I dont mind it so much. For me its a hobby/source of income/fun challenge. Not really too much about the money since i have a "normal" if you will, day job. Its a supplement basically but what bothers me so damn much like a poster said yesterday. The tipping point is knowing im being lied to and conned by other sources everyday. How these people in the MSM wake up everyday and live with themselves is beyone me. I guess thats why i luv the ridicule. Why the best read in the world was Tylers, (CNBC lowest viewership in 7 years blog) That made my week!! Its just not in my DNA to be able to wake up everyday and know people are loosing so much for what i say in front of a TV. Its just unbelievable to me.I guess im the crazy one. I dont know what i would do without the tylers and all the great posters here. We poke fun but i learn so much from you all. And have a  laugh to!

Thu, 08/09/2012 - 19:21 | 2692514 willien1derland
willien1derland's picture

If you play Pink Floyd's 'Dark Side of the Moon' when the animated graph starts you can see Geithner & Bernacke receiving "contributions" from K Street lobbyists...

Thu, 08/09/2012 - 19:21 | 2692515 toomanyfakecons...
toomanyfakeconservatives's picture

Laugh while you can... it's gonna be like The Day The Earth Stood Still when the MASS ARRESTS occur and hundreds of top traitors are paraded in front of the cameras...

Thu, 08/09/2012 - 19:24 | 2692521 Meesohaawnee
Meesohaawnee's picture

yea.. which decade??

Thu, 08/09/2012 - 19:27 | 2692525 Heroic Couplet
Heroic Couplet's picture

Excellent. The more Wall Street fraud, the better for the rest of the US.

Thu, 08/09/2012 - 19:31 | 2692533 roadsnbridges
roadsnbridges's picture

Holy shit!  This is great on the big screen HDTV!

(In chart porn heaven)

Thu, 08/09/2012 - 22:34 | 2692922 slewie the pi-rat
slewie the pi-rat's picture

slewie's new lava lamp, too!

Fri, 08/10/2012 - 05:53 | 2693438 awakening
awakening's picture

Although I know they are robbing the public hand over fist; I admit that there is a certain beauty/fascination to it when presented via these animated HFT chart images.

Thu, 08/09/2012 - 19:40 | 2692545 buzzsaw99
buzzsaw99's picture

What we've got here is failure to communicate. Some algos you just can't reach. So you get what we had here last week, which is the way they want it. Well, they get it. I don't like it any more than you men. [/captain - cool hand luke]

Thu, 08/09/2012 - 20:01 | 2692605 nmewn
nmewn's picture

A classic, its got it all.

"Whats that dirt doin in Boss Keen's ditch?"

Thu, 08/09/2012 - 19:40 | 2692549 SheepDog-One
SheepDog-One's picture

Nice! As long as Skynet is more aware, thats all that really matters! Should only be a couple more months until Skynet starts building T-1 Terminators nites and weekends.

Thu, 08/09/2012 - 19:42 | 2692554 Alpacanio
Alpacanio's picture

Hay! I just got me one of them Bear Grylls Survival Knifes! Now i can beat down them robo traders!

Thu, 08/09/2012 - 20:00 | 2692602 Landrew
Landrew's picture

At the Holiday Inn?

Thu, 08/09/2012 - 19:49 | 2692567 bankruptcylawyer
bankruptcylawyer's picture

did you think you could post GIFS FOR THE FIRST TIME ON ZH AND NOT EVEN MENTION IT!?!???!?!?!


Thu, 08/09/2012 - 19:51 | 2692570 ACP
ACP's picture

Tyler, a section in this site dedicated to this type of behavior would be very popular.

Thu, 08/09/2012 - 20:01 | 2692603 Againstthelie
Againstthelie's picture

Any real painters here?

If all the garbage today that is marketed as art, then i want a big oil picture of this chart. In 50 years, when the Dollar and this system will be gone, this will be a worth many, many ounces.

Thu, 08/09/2012 - 20:05 | 2692622 q99x2
q99x2's picture

How they gonna make more money if the stock isn't driven higher. With a limited number of successful trades at a percentage it helps that the price goes higher. But what if something goes wrong?

I'll be there.

Thu, 08/09/2012 - 20:08 | 2692630 Sokhmate
Sokhmate's picture

"Core War"

Thu, 08/09/2012 - 20:10 | 2692640 Money 4 Nothing
Money 4 Nothing's picture

Does anyone remember the earthquake we had on the East Coast not too long algo? The traitors.. err.. I mean, traders were ordered to leave the building at NYSE until the time they deemed it safe to return to their desks.

The market didn't miss a beat and the dollar USDX actually went up with nobody tending the Bot's! Soo, there you have it, why even show up to work? it's all a scam.

This dudes keyboard wire wasn't even connected to anything one morning shown on MSNBS as they were walking down the floor one morning waiting for the opening bell. 

Thu, 08/09/2012 - 20:13 | 2692648 Dr. Engali
Dr. Engali's picture

Remember the days when you would study the company you're interested in, check out the fundamentals, pick your entry and your exit point... Ahhhh good times.... Good times.

Thu, 08/09/2012 - 20:21 | 2692668 govttrader
govttrader's picture

Seriously, this is why the bond market is such a better place to be...the algos there are lightyears behind the equity markets...its almost...human

Thu, 08/09/2012 - 20:33 | 2692691 michael_engineer
michael_engineer's picture

Regarding HFT :

As a software engineer with market insights, I suspect that the quick algo swings up and down (and sometimes as shown at ZH before ( as growing in amplitude) are designed to increase nervous tensions that result in people or other algo's to adjust their limit orders or stop loss orders on both stocks and options. The algo may probe then stand back for 5 to 30 minutes to watch for changes then probe again. After determining weakness or panic then the algo can swing in for the profits such as in a short covering period.. An algo like this could easily be used in situations where the bid ask spread is large so no trades would even likely result but the information gained by watching the changes to the bids, asks, and limits in the next few minutes could be analyzed for exploitation.

Another manipulation could be to alter the true bid/ask prices towards the direction you want a stock to move, even though no trades may have occurred. The wildly swinging prices on sweeping orders might allow a trading house to claim any value in the swept through price range as the bid and ask values even though there was never any intent for the HF trade order to execute. An algo could even report one bid/ask spread to someone positioned long and a different spread to someone positioned short, and both of those bid ask ranges may have been true in the previous second. Does anyone know if the bid/ask spreads for all customer inquiries (or data pumps or data feeds) has ever been examined to look for a customer by customer bias where short and long positions are given slightly different sets of data?

That's how I would design the logic.

Statistics could be kept and a trading algo could become very confident in the outcomes. If an algo has been run hundreds of thousands (or even millions) of times in the past and fine tuned from the knowledge gained, then it could easily recognize places for it to attempt to step in with a trading strategy that has proven itself as successful in similar scenarios in the past. Part of the quants jobs are to quantify statistically the success of algorithms tried out on the markets

Thu, 08/09/2012 - 20:49 | 2692722 Ted Baker
Ted Baker's picture

In short it's called Statistical Arbitrage or SAR as we know it in my team

Thu, 08/09/2012 - 20:46 | 2692717 Tunga
Tunga's picture

Let the machines do as they please. Humans are the parasites! 

Thu, 08/09/2012 - 21:09 | 2692767 Nid
Nid's picture

We are 138, we are 138, we are 138
We are 138, we are 138, we are 138
We are 138, we are 138
In the eyes of tiger

Do you think we're robot clean
Does this face look almost mean
Is it time to be an android not a man
The pleasantries are gone
We're stripped of all we were
In the eyes of tiger

We are 138, we are 138, we are 138
We are 138, we are 138, we are 138
8, 8, 8, 8, 8, 8, 8, 8, 8, 8, 8, 8, 8, 8
8, 8, 8, 8, 8, 8, 8, 8, 8, 8, 8, 8, 8, 8

Thu, 08/09/2012 - 21:20 | 2692795 Cardinal Fang
Cardinal Fang's picture

Looks like an EKG...of a market on life support.

Fri, 08/10/2012 - 01:22 | 2693262 Go Tribe
Go Tribe's picture

Can someone explain to me what it means to blast out empty quotes? I thought these were trading machines - bid / ask. What's an empty quote and why?

Fri, 08/10/2012 - 07:02 | 2693476 GNWT
GNWT's picture

What's with all the screaming about algos?

Traders dream or would you rather be right than make money?

Buy NQ or ES in two one minute higher highs and higher lows on a 

stop for entry, sell for a couple of ticks.




Stay liquid my friends...

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