This Just in: “May 6th Was an Unusually Turbulent Day in the Markets.” Who woulda thought? I certainly can’t tell just by looking at this chart.
Today’s CFTC report basically told everyone a bunch of things they already knew. That a turbulent climate in Europe set the stage for a huge down day that overran the market with fear, exacerbated by high-frequency algorithms and retail stop-losses triggering each other in turn like some snot-nosed brat playing an avalanche-inducing round of Domino Rally atop a mountain of human shit.
Remember that the initial speculation was a fat-finger from someone on an institutional desk (Citi was the one named) swiping bids to unload 10 billion S&P E-mini contracts? The report now says it was 75,000 contracts, quite a bit less, but still a SHITLOAD of liquidity to wipe out in 20 minutes. And obviously high-frequency traders see that happening and proceed to bomb the hell out of the already sinking ship. As a wannabe day-trader who was in (and out of) equities on May 6th, I can tell you that when you see the above chart at 2:40 and CNBC is literally broadcasting video of Greek citizens storming banks with Molotov cocktails to the chagrin of riot-control police officers, the easiest thing you’ve ever done in your life is hitting that sell button (assuming you can avoid having an anxiety attack).
Tune in to your favorite talking heads if you like hearing the terms “circuit breakers” and “exacerbating factors,” but stick to WG if you want to hear some things you didn’t already know, for example: CFTC Chairman Clifton has a really nice mullet. Looks like if he tires of finance he could have a fruitful career in the WWF.
Filed under: Research, TV, Very Serious Business, WTF | Tagged: algorithm, bonds, Business, cnbc, Commodity Futures Trading Commission, Day trading, Dow Jones Industrial Average, Education and Training, Eurodollar, european banks, finance, flash crash, greek bond crisis, hedge funds, high frequency traders, Investing, investments, Market liquidity, may 6 2010, S&P 500, SEC, stocks, traders, trading, Waddell Reed |