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Posts Tagged ‘quote stuffing’

The Eerie Implications of Market Volume and Mutual Fund Flows

The Eerie Implications of Market Volume and Mutual Fund Flows 

Courtesy of Doug Short 

Once upon a time, market volume, in combination with price, was a useful indicator. Or make that indicators (plural), including Rate of Change, Volume Oscillator, On Balance Volume, Price and Volume Trend, Accumulation Distribution, Chaikin Oscillator, Money Flow Indicator, etc.

Even so, S&P 500 volume has been falling since early May with no sign yet of a post-summer seasonal increase. Of course, we’re still in the holiday shortened week following Labor Day. But look at the 2009 volume pattern on the chart. Where was the volume to confirm the market advance after a choppy October?

A recent WSJ article, SEC Is Looking at ‘Quote Stuffing’, mentioned in passing that high-frequency trading (HFT) accounts for about two-thirds of the market’s volume. 

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I don’t know of a single comprehensive guide to what the retail investor is really up to, but the impression I get is that the equities are not high on the list of where to park money. The next two charts, covering the same timeframe, are based on data in a PDF file I downloaded from the Investment Company Institute. Since the chart above is a broad U.S. Index, the first chart below only measures fund flows for domestic equities. 

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Naturally these charts are open to various interpretations. Bond Bubble Cassandras will see the last chart as a confirmation of their prophecy. Cheerleaders of ETFs and other alternatives to mutual funds may be inclined to disregard both fund-flow charts as largely irrelevant.

I used the wood "eerie" in the title to this piece primarily to convey my impression of a vague sense of disquiet about markets and the economy. Are retail investors sitting on the sidelines or scurrying to bonds because of anxiety about the market? If so, should we take this as a contrary indicator?

Here’s a more compelling question: If two-thirds or more of daily volume is a function of high-frequency trading, what are the implications for index prices over the long haul?

A year has passed since I posted some charts illustrating the incredible ratio of S&P 500 volume devoted to five financial stocks (see Gaming the Market). Today’s game is no doubt different…
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“It’s Not A Market, It’s An HFT ‘Crop Circle’ Crime Scene” – Further Evidence Of Quote Stuffing Manipulation By HFT

"It’s Not A Market, It’s An HFT ‘Crop Circle’ Crime Scene" – Further Evidence Of Quote Stuffing Manipulation By HFT

Courtesy of Tyler Durden

HFTRecently we posted a required reading analysis by Nanex in which the market trading analytics firm presented irrefutable evidence of quote stuffing by HFT algorithms in tens of stocks, in which thousands of cancelled quotes would reappear each second with a definitive periodicity and regularity, around the time of the May 6 flash crash. Aside from the fact that it is illegal to indicate a quote without a trade intent, this form of quote stuffing is in fact manipulative when conducted by HFT repeaters in specific "shapes" as it actually moves the NBBO actively higher or lower, in cases pushing the bid/offer range up to 10% higher without even one trade ever having occurred, simply by masking a big block order which other algos interpret as bid interest and pull all offers progressively or step function higher (or vice versa, although we have rarely if ever seen the walking down of a stock over the past 18 months). It is as if the HFT lobby has been given the green light by the powers that be that it is safe to activate merely the bid-size quote stuffing algorithms, and not worry: the fact that the market is so one sided in its quote stuffing patterns is sufficient reason to worry of a concerted effort to push stocks higher, initiated from the very top, and effected by not only the Primary Dealer community but by the end-market "liquidity providers."

Today, courtesy of Nanex we demonstrate that this type of illegal stock manipulation continues rampant to this very day, and the SEC still fails acknowledge that it is precisely the HFT market participants that persist in destabilizing stock prices, which have given up responding to fundamentals and merely move up or down based on quote stuffing interventions by those who plead innocence and claim to only be providing liquidity. Well take a look at the millions in fake, and thus illegal, bids demonstrated below and tell us just how any of this manipulation is "providing liquidity" – the second the patterns break, the algos responsible for the churn pattern disappear, thus eliminating numerous levels of so called bid liquidity below the NBBO: break enough patterns and you have another flash crash
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How HFT Quote Stuffing Caused The Market Crash Of May 6, And Threatens To Destroy The Entire Market At Any Moment

How HFT Quote Stuffing Caused The Market Crash Of May 6, And Threatens To Destroy The Entire Market At Any Moment

Courtesy of Tyler Durden at Zero Hedge 

Even as the idiots at the SEC mope about cluelessly, confirming they deserve not one cent of taxpayer money to fund their massively overbloated budget, and should all be summarily fired to collect tarballs in the Gulf of Mexico (and soon Maine), our friends at Nanex have conducted an exhaustive analysis (must read for everybody concerned about market structure), in which they identify the various parties responsible for the market crash, and, drumroll please, High Frequency Trading stands at the pinnacle of culprits for the 1,000 point Dow drop. From their findings: "While analyzing HFT (High Frequency Trading) quote counts, we were shocked to find cases where one exchange was sending an extremely high number of quotes for one stock in a single second: as high as 5,000 quotes in 1 second! During May 6, there were hundreds of times that a single stock had over 1,000 quotes from one exchange in a single second. Even more disturbing, there doesn’t seem to be any economic justification for this. In many of the cases, the bid/offer is well outside the National Best Bid/Offer (NBBO). We decided to analyze a handful of these cases in detail and graphed the sequential bid/offers to better understand them. What we discovered was a manipulative device with destabilizing effect."

In other words: enough with all the bullshit about HFT as a liquidity provider mechanism: in reality this is just a facade for the most insidious, computerized market manipulative device ever created. Nanex’ conclusion: "What benefit could there be to whomever is generating these extremely high quote rates? After thoughtful analysis, we can only think of one. Competition between HFT systems today has reached the point where microseconds matter. Any edge one has to process information faster than a competitor makes all the difference in this game. If you could generate a large number of quotes that your competitors have to process, but you can ignore since you generated them, you gain valuable processing time. This is an extremely disturbing development, because as more HFT systems start doing this, it is only a matter of time before quote-stuffing shuts down the entire market from congestion. We think it played an active role in the final drop on 5/6/2010, and urge everyone involved to take…
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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743"

Thank you for you time!

 
 

Insider Scoop

UPDATE: Symmetry Medical to Sell OEM Solutions Business to Tecomet, Spinoff Surgical Unit

Courtesy of Benzinga.

Related SMA Symmetry Medical To Sell Business That Makes Up 80% Of Revenue US Stock Futures Signal Higher Start On Wall Street Mid-Market Report: Dealmaking on the Rise (Fox Business)

Tecomet Inc., a Genstar Capital portfolio company and precision contract manufacturer supporting the medical device and aerospace industries, today announced that it has signed a definitive agreement with Symmetry Medical Inc. (N...



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Zero Hedge

When 'Anti-Government' Violence Erupts, Who Is Really At Fault?

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Brandon Smith of Alt-Market blog,

This past week, I have been examining a recently leaked document from the Department Of Homeland Security entitled “Domestic Violent Extremists Pose A Threat To Government Officials And Law Enforcement.” (Yes; the title leaves nothing to the imagination.)

Generally, such documents are not classified. But it is internally accepted within establishment agencies that they should not be shared with the public....



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Phil's Favorites

Argentine peso hits record lows on increased uncertainty

Argentine peso hits record lows on increased uncertainty

Courtesy of SoberLook.com

Argentina is showing signs of stress, as the official exchange rate has the US dollar now quoted 8.4 pesos - a new record.

Chart shows USD appreciating against ARS (source: Investing.com)


The "parallel" exchange rate also hit a record, with the dollar quoted at 14 pesos - a 67% premium to the official rate. Note that before the first devaluation in 2002 (see this ...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Chart School

Getting Technical: Weekend Update

Courtesy of Doug Short.

Here's the latest weekend update from Serge Perreault, a Chartered Professional Accountant and market technician located near Montreal, Canada. Serge has been following the U.S. market in a series of weekly charts. Here is his update on the S&P 500.

This week, the S&P 500 broke above its previous record close by 3 points, on strong but near-resistance momentum and on below-average volume.

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Note: For newcomers to technical analysis, here are brief explanations for the two key indicators that S...



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Option Review

CME Group Put Options Active

Options volume on the provider of futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals and alternative investment products is well above average on Thursday morning, due in large part to a sizable put spread initiated in the 19Sep’14 expiry contracts. Shares in CME Group (Ticker: CME) are up slightly on the day, trading 0.25% higher at $74.34 as of the time of this writing.

The largest trade on CME today appears to be a bear put spread in which roughly 1,500 of the 19Sep’14 74.0 strike puts were purchased at a premium of $1.44 each against the sale of the same number of t...



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Sabrient

Sector Detector: Bullish investors jockey for position as if the correction is over

Courtesy of Sabrient Systems and Gradient Analytics

As many investors enjoy the final weeks of summer, some optimistic bulls seem to be positioning themselves well ahead of Labor Day in anticipation of a fall rally. Indeed, last week’s action was impressive. After only a mere 4% correction, investors continued to brush off the disturbing violence both at home and abroad, and they took the minor pullback as their next buying opportunity. But was that really all the pullback we’re going to get this year? I doubt it. But I also believe that nothing short of a major Black Swan event can send this market into a deep correction.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then ...



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OpTrader

Swing trading portfolio - week of August 18th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

The Stock World Weekly Newsletter is ready to go! View it here: Stock World Weekly. Just put in your user name and password, or take a free trial. 

 

#120692880 / gettyimages.com ...

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Market Shadows

Helen Davis Chaitman Reviews In Bed with Wall Street.

Author Helen Davis Chaitman is a nationally recognized litigator with a diverse trial practice in the areas of lender liability, bankruptcy, bank fraud, RICO, professional malpractice, trusts and estates, and white collar defense. In 1995, Ms. Chaitman was named one of the nation's top ten litigators by the National Law Journal for a jury verdict she obtained in an accountants' malpractice case. Ms. Chaitman is the author of The Law of Lender Liability (Warren, Gorham & Lamont 1990)... Since early 2009, Ms. Chaitman has been an outspoken advocate for investors in Bernard L. Madoff Investment Securities LLC (more here).

Helen Davis Chaitman Reviews In Bed with Wall Street. 

By Helen Davis Chaitman   

I confess: Larry D...



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Digital Currencies

BitLicense Part 1 - Can Poorly Thought Out Regulation Drive the US Economy Back into the Dark Ages?

Courtesy of Reggie Middleton.

An Op-Ed piece penned by Veritaseum Chief Contracts Officer, Matt Bogosian

This past weekend (despite American Airlines' best efforts), Reggie and I made it to the Second Annual North American Bitcoin Conference in Chicago. While there were some very creative (and very ambitious) ideas on how to try to realize the disruptive Bitcoin protocol, one of the predominant topics of discussion was New York Superintendent of Financial Services Benjamin Lawsky's proposed Bitcoin regulations (the BitLicense proposal) - percieved by many participants at the event as an apparent ...



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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



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