Yesterday was a great example of a new characteristic of this market that is truly disturbing – I’m calling it "Adult Swim". On many days, at or around 3PM, the market becomes unsafe for human beings as the churning high frequency trading machines jump in to do their thing. This is like the public pool, when all children are called out of the water so that the big kids can cannonball and thrash about – the lifeguard blows his whistle to signal that it’s time for Adult Swim.
On many recent days, we’ve seen the program traders run amok in the last hour of trading, hitting stops and just generally bringing the ruckus.
Take a look at yesterday’s intraday chart of the major averages below for an example:
The damage to the psyche of individual investors and the "slow money" that used to support the markets is snowballing into what may become an outright protest. The $25 billion in US stock mutual fund outflows since the beginning of May is the body I’ll produce as evidence of a crime.
My question to the proponents of the tradebot society is this:
Once you’ve chased the last 401(k) holders, the last retail investors, the last retirees holding blue chips out of this market, whom will you trade with?
Whose stop loss orders will you discover and trigger? Whom will you abuse and scalp? Each other? Actually, I’d very much like to see that.
The 3 PM Adult Swim hour is destroying what last shreds of faith in this market remain.