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carltonp

What Happened Today?

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06-03-11 12:53 AM

Hello Traders,

 

Can someone tell me if it is really possible for a large investment bank/house to control the prices of all the stocks comprising DJIA? The reason why I say that is because at precisely 14:17pm all 30 stocks from DJ 30 tumbled - and at the same time. I mean they were steadily climbing then boom! They all tanked in unison. I could understand if they lost steam and were sold off gradually, but to suddenly drop and then rise again within minutes leads me to think it's possible for a few large banks to make that happen.

 

I was trading the mini Dow at the time and my style of trading is to buy/sell a contract depending on where the majority of the 30 stocks are going at the time of placing a trade. So I was long around 14:15 and the index was moving up in line the majority of stocks, then everything crashed - I mean all stocks just crashed in unison. I actually thought there was some outside disaster, but then all stocks started to appreciate. Of course I was stopped out, however I would love to know if there was any news event that happened today to cause the stocks to behave the way that they did or was there some entity involved?

 

Would love to get your comments

 

Cheers

 

Carlton

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06-03-11 12:53 AM

Hello Traders,

 

Can someone tell me if it is really possible for a large investment bank/house to control the prices of all the stocks comprising DJIA? The reason why I say that is because at precisely 14:17pm all 30 stocks from DJ 30 tumbled - and at the same time. I mean they were steadily climbing then boom! They all tanked in unison. I could understand if they lost steam and were sold off gradually, but to suddenly drop and then rise again within minutes leads me to think it's possible for a few large banks to make that happen.

 

I was trading the mini Dow at the time and my style of trading is to buy/sell a contract depending on where the majority of the 30 stocks are going at the time of placing a trade. So I was long around 14:15 and the index was moving up in line the majority of stocks, then everything crashed - I mean all stocks just crashed in unison. I actually thought there was some outside disaster, but then all stocks started to appreciate. Of course I was stopped out, however I would love to know if there was any news event that happened today to cause the stocks to behave the way that they did or was there some entity involved?

 

Would love to get your comments

 

Cheers

 

Carlton

 

what chart resolution do you follow?

Edited by Tams

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a couple of possible reasons.

1... a large pension fund/insto decided to sell a basket of stocks.

2....a large seller came into the futures index and arbs sold off the underlying stocks (you would really need to nail down which came first)

3.....it might have been a complete coincidence

4....algos might have been related to something else that moved and hence pulled bids which set off a chain reaction for other algos that rely on measuring bids etc;

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a couple of possible reasons.

1... a large pension fund/insto decided to sell a basket of stocks.

2....a large seller came into the futures index and arbs sold off the underlying stocks (you would really need to nail down which came first)

3.....it might have been a complete coincidence

4....algos might have been related to something else that moved and hence pulled bids which set off a chain reaction for other algos that rely on measuring bids etc;

 

And the moral to the story?

 

I mean all stocks just crashed in unison. I actually thought there was some outside disaster, but then all stocks started to appreciate.

 

Of course I was stopped out

 

Of course - you were MEANT to be stopped out.

 

The flash crash of May 6th 2010 still has not been officially explained, but whatever caused that even seems to be at play again ... 13 month later. Back then the DOW dropped about 900 points in a few seconds, and then recovered "in a few minutes."

 

According to Wikipedia:

 

"It was the second largest point swing -1010.14 points - and the biggest one-day point decline - 998.5 points - on an intraday basis in Dow Jones Industrial Average history"

 

It proved fairly lucrative then, for those with the "right" kind of contingent orders, or the fastest brains ( think the former) and as making money the easy way can be addictive, methinks the money-makers are again flexing their electronic muscles.

 

"They" are just smarter now ... the flash crash caused a lot of bad press for people like Goldman Sachs, so it makes sense now to do the same thing on a smaller scale, and less frequently.

 

The easiest way to find out what happened would be to find out who stood to gain from it (or who actually gained from it.)

.

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..........

aren't life great?

 

 

 

and the moral to the story?

 

...

 

Of course - you were meant to be stopped out.

 

....

 

 

..........

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there is nothing moral and/or no moral to the story, there is probably not even a conspiracy theory....point is this, and has IMHO always been a part of the market and is simply more pronounced now and quicker....no matter the reason behind it. Adapt, learn, adapt....lengthen time frame.... why as a retail person do people keep trying to compete and /or complain or even try to understand and think they know exactly what is happening with/about the algos.

I dont think my 1998 Nissan pulsar with 180,000km on the clock is going to beat a top of the line new mercedes off at the lights, and if it did, delusional would be a word that comes to mind.

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I can remember the first time I experienced similar. I traded stocks at the time and had a couple of different quote grids that monitored a decent number of stocks. Well I am sitting there enjoying a coffee and bang everything went green....I mean absolutely everything. And not just a little bit green full on green green. I did actually guess the cause (more luck than judgement) it was a completely unscheduled rate cut (a quarter point if memory serves).

 

Anything 'fundamental' that affects peoples perception of 'value' can cause massive amounts of money to be moved between asset classes. If it is fairly unexpectedly this can happen extremely suddenly and quite violently. Whilst fairly rare it's all part of trading.

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there is nothing moral and/or no moral to the story, there is probably not even a conspiracy theory....point is this, and has IMHO always been a part of the market and is simply more pronounced now and quicker....no matter the reason behind it. Adapt, learn, adapt....lengthen time frame.... why as a retail person do people keep trying to compete and /or complain or even try to understand and think they know exactly what is happening with/about the algos.

 

Probability of yours and my viewpoints being correct ~ unknown.

 

CMC in early 2003 - 2005 were proven to be spiking out stop-loss positions in CFD accounts in Australia.

 

When called out on it and the information posted on Incrediblecharts and other forums, (T2W I recall also posted on it) CMC reversed those losses. It was not good for business ... for traders, brokers or the industry generally.

 

So the mindset to actually do these things is out there, and imho has simply become more sophisticated. Bottom line - it's all about the money, and if they can take it from you they will.

 

In the FSG fine print, or their PDS - forget which - IGM (and I suspect CMC as well) say that they "act as principle in the matter" meaning they take the opposite side of your trade. They have an unfair advantage in that they are also allowed to make the market. The fine print also says that they are allowed to move the market any direction they choose, "if it is in the best interests of the company."

 

They also have the right to close positions "if they so choose" ... "without giving explanation for so doing."

 

That does not represent a fair and level playing field ... hell ... they can even move the goal posts after the ball has been kicked, and they actually warn you - and you agree to it - that they can do it.

 

But that is the "market maker" model. These days IGM "guarantee to match exactly" the underlying market from which their prices are derived. It does not mean they are not allowed to widen the spread "in times of low liquidity" (whatever "low liquidity" means is at their discretion, and is not clear.)

 

Like you, I tend to not become too distracted by conspiracy ideas, but the memories of it linger when such things did occur. I didn't say CMC acted illegally ... just unethically; and as we know, ethics has nothing to do with financial transactions. Their reversals of the spiked-out trades were more an act of sheepish goodwill at that time ... a form of discounted advertising for what good fellows they are.

 

An acquaintance of mine had an extremely profitable short position with IGM, and that was at the beginning of the downturn March 2007. IGM contacted him and asked him to close the position. Their excuse? "The client wants to buy his shares back."

 

Total fabricated rubbish. The "client" did not exist, because IGM do not deal in real equities. They are a market maker who mirrors the true market. IGM simply saw like I did and many others, that the dreaded correction was upon us, and that this leveraged short was likely to cost them hundreds of thousands of dollars - if not a million dollars or more.

 

The bloke already had $80,000 profit. I advised him to seek professional advice on whether he actually was obliged to close the position - my feeling at the time was the same as it is now - no. It was simply IGM covering their bases ... and trying to shake him down. He didn't do that - he just acquiesced meekly ... a bit dumb imho.

 

Coulda beena millionaire ... :doh:

 

What happens today?

Algorithms?

Dunno ... no one can get inside of one to know what makes them chime. But if someone is using one, then they are using it to make money in a market where every advantage counts.

 

And if an algo is an advantage, then shouldn't everyone be using one?

Edited by Ingot54

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Can't really compare CMC with real markets. They can move the market at will without expending a single dime. It's just a completely different game and in those days it was particularly wild and woolly.

 

Edit: I actually had the satisfaction of taking quite a lot of money from CMC. They started in the UK as Deal4Free guess that was 15+ years ago. How is a story for another time but it was extremely satisfying:beer:. Eventually they widened the spreads on me to $'s rather than cents effectively shutting me down :(

Edited by BlowFish

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Hello Gents,

 

Thanks to all for your comments.

 

I've read and re-read your comments and I think Siuya has the key "Adapt, learn adapt" is the key. Before this event I thought I was invincible, I was making between $500 - $700 per day and I thought it would never end. Yesterday, was rough market but I managed to make $701, but ended up losing $1055. It was real eye opener.

 

Anyway, I scalp the mini-dow. I stopped trading stocks after reading John F. Carters book. It made sense that to trade individual stocks left traders open to all sorts of events that may happen to company - legimate and illegimate. So by trading an Index and buying a contract depending on how well the underlying stocks are performing meant that no single individual company could adversely move an index (unless it has a very high weight in the index). But what really messed up my brain was when I saw all 30 stocks move in unison. I promise you, anyone that was watching the stocks of the DOW will agree with me. It was amazing.

 

Anyway, thanks for your comments. I wish the guys at Elite Trader were as forthcoming with comments as you guys here on TL.

 

Cheers

 

Carlton

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Anyway, thanks for your comments.

 

I wish the guys at Elite Trader were as forthcoming with comments as you guys here on TL.

 

Cheers

 

Carlton

 

You know what to do with ET then ... :rofl:

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06-03-11 12:53 AM

Can someone tell me if it is really possible for a large investment bank/house to control the prices of all the stocks comprising DJIA?

 

I know what you are saying, but I don't know the answer to your question. It's not just the Dow and the Dow e-mini that are closely correlated. Many stocks track the index they are in very closely. So the question is, are the stocks tracking the index, or is the index tracking the market, or are they both tracking each other, and how is it that they are so close? I don't know. I have no idea. But it's something I have wondered about myself.

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Hello. The spike on 6/02/2011 at 14:17 was seen in all of the futures instruments at the exact bar. It was in the ES, NQ, YM, TF, and EUROUSA. (the ones I watch). I noted this in a forum and said imvho that the market makers just received a "world news event" that "we traders" would not hear for 1-24 hours.

 

The method of watching the Dow 30 bias trend is a simple but effective method. IMVHO, expand you method to include the ES, NQ, and TF as well. Learn where the turn signals are at in each instrument. You must learn all four, as the Dow just gives market turn signals 25% (approx.) of the time.

 

Best of luck,

cb

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Interesting discussion. I had a stock that was slowly uptrending for several years and I never placed a stop on it until I learned about stops. Soon after I placed a stop on it, I got stopped out. The price that I got stopped out on never showed up on the price chart nor on the "Time And Sales" report. Some market maker traded on my stop and it was never recorded. See my post on What good are trailing stops?

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Very interesting....

 

I got the following statement from an Intraday trader:

 

It happens all the time. Nothing amazing about it. It is called program selling. Nothing fancy about it either. Index arbitrage will also do it. Buy the futures and sell the basket of stocks in the index.

 

 

Would you guys agree?

 

BTW, Crossbones, I do indeed watch ES and NQ along with YM, however I'm not familiar with TF. What index is that?

 

Cheers

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With all due respect, I think the question is naive. OF COURSE the big banks and investment houses manipulate the market! Did you ever doubt that? If you trade index futures, you had better know that as an absolute, or you will be erased (as Arnold might say). I dont trade the YM (new futures traders are steered there for a reason), but the ES rally off the open was a given and very generous. Im not sure what time you got in, but it was a Friday (meaning 1/2 size, lighter participation, exit early, etc), so profit taking after a gift is a very high prob outcome. 5 red weekly candles in a row... WHO would WANT to hold over a weekend?

 

They (the Big Boyz) caused and took advantage of a short sqeeze / daed cat bounce, were fat green, and took profits. Once the long move failed (12:54 EST for ES), Longs sold to lock in profits. Their sellings nudged the bears, and it was Party On!

 

IMHO, I suspect the time is right for a "normal correction" (at least). A close under 1300 was almost foretold. Question is, will the Govt use their execution arm (GS), to 'stimulate' the markets back up. Where is the good news? QE2 ends this month, we have a FOMC mtg coming up... pick your poison. The market have been going straight up for more than 2 yrs on weak underlying economics, a house of cards.

 

Bottom Line: Trade what you SEE, Not what you THINK. The futures markets are designed to sweep stops and shake out weak hands. I am a scalper, and think it is the only way to stay solvent in the coming vol....

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Bottom Line: Trade what you SEE, Not what you THINK. The futures markets are designed to sweep stops and shake out weak hands. I am a scalper, and think it is the only way to stay solvent in the coming vol....

 

I too am a scalper and I'm on the same page as you .... Only trade what I see....

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