Category Archives: flash crash

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bonds, bonds or stocks, Dow Industrials, Early Warning, flash crash, Flash Trading, high frequency trading, indicators, programmed trading, quants, selloff, TRIN (ARMS Index)

May 6th…A Day When the Stock Gods are Angry?

bonds, bonds or stocks, Dow Industrials, Early Warning, flash crash, Flash Trading, high frequency trading, indicators, programmed trading, quants, selloff, TRIN (ARMS Index) Leave a comment

Flash Crash 2nd Anniversary This Weekend!

I was rummaging through some old posts on our Trader’s Forum this Friday evening with a cold drink in hand and suddenly realized that we are coming up on the 2nd anniversary of the famous Flash Crash in 2010. I remember that moment clearly–

Traders awoke that morning to images of violent protests and mob scenes on their TVs–emanating from Greece. The US stock market had already been under some pressure, and the futures were flashing triple digit red. After closing down a couple more long trades that I had let linger too long– and playing a few shorts in the morning, (but otherwise staying mostly to cash as I had seen the ugly charts in the days preceding), I went off for lunch at one of my local diners.

I arrived back to to my trading room at the house around the 2 o’clock hour to see a Dow plunging….it was down 700 points!  Even I was stunned by that- It was too late for a couple of long term positions that I held, so I just sat tight and hoped for the best….suddenly, we were down more….800, then 900…then 1,000 points down! Wow! It happened literally in about 3 or 4 minutes….there wasn’t time to react to anything….I just watched the few stocks I had that day either swoon…or rise if they were the short ETFs I had bought–during that crazy several minutes time-frame– with CNBC playing on in the background of my office.

But, then the computers that had caused the Flash Crash to begin with, suddenly found buying strength….. the Dow and other indexes began their big bounce ( I recall that TRIN was down double-digits at the peak, so TRIN was forecasting a strong bounce)….I quickly sold one stock that I was caught with as it rallied back.  I don’t quite recall where we ended the day, but it seems like we made back about 600 points from that low by the close.

I’m sure that some of you readers also have memories of that day.

Now, flash ahead two years later….

Fittingly, May 6th of 2012 is the day of
the French presidential election….and Greece is to vote on its new
parliament on May 6th too. These are TWO critical events for the stock and bond markets around the world….and it takes place tomorrow….on a Sunday.

As I noted on our popular Trader’s Forum at TalkingStocks.AceStockTrader.com
this past two days, the charts have gotten very ugly, and the set-ups for ACCELERATED SELLING are in place. I realize that many traders may be expecting the outcome of May 6th 2012 to be a “sell the news event.” Even I have thought this for most of the past few days….except for the fact that the charts have been flashing MAJOR WARNING in many cases, especially in leader stocks like AAPL and GOOG.

Furthermore, a look at the French and Spanish stock market index charts also shows the set-up for a possible crash in those two markets! The US and German bond markets have seen their benchmark yields fall to near record lows as money flees riskier investments. The TRIN chart has been selling off the past 4 out of 5 sessions, but there has been no capitulation signal yet–similar to what we saw in the great 2008 late summer collapse.

Perhaps nothing major will come of it? But, I am at least putting out the word tonight that the set-up is there for a possible stronger spill. Does this mean we will have another Flash Crash come Monday or Tuesday? Who knows…that would be wild speculation to say it would be a certain event, but I do believe that the set-up is there for some stronger selling before we find a firm bottom area of support.

The computers and the Quants that program them always seem to figure a way to reverse things when we least expect it….and if they can’t do it, then they usually leave it up to “the Bernank” to talk the markets back up. There’s nothing quite like a few gentle, soothing words from Uncle Ben to bring relief! 

Anyhow, I’m reminded of the Flash
Crash, and I had saved this link from www.CNBC.com  a few months ago which reminds us
that Flash Crashes are more common events than they were once thought to
be…

Click Here for “Flash Crash Threatens to Return with a Vengeance”

Whatever the outcome of Sunday’s elections in Europe, it’s probably a good thing that there will be no trading in the US on May 6th of this year! Do “the stock gods” become angry on this date in even-numbered years?

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flash crash, gold, gold miner, precious metals, programmed trading, treasuries, US dollar, US Treasury

Stay with Gold for the Long Term! Don’t lose your positions with short term manipulations…

flash crash, gold, gold miner, precious metals, programmed trading, treasuries, US dollar, US Treasury Leave a comment

Computers gone wild!

Yep,
tonight’s action in gold is an example of how the computers can FLASH
CRASH any commodity, any bond or any stock at any given time.

As
far as I can tell, it’s all because the Bernank kinda said he doesn’t
have any QE3 plans right now….that’s why I sold my HL as quick as I
could, but I did not have time to unload my PPP before the market
closed–I was away from the office and could only make one trade on my
smartphone app before the close (DRD I sold a couple days ago for a nice
gain)….

CEF I never sell….always hold that one.

Still,
I think it’s temporary….reading thru Jim Rickard’s work with Currency
Wars….he is an esteemed economist who values gold somewhere between
$3400 and $12,000 based on what monetary base is used (M1 and M2 as
examples) and what percentage base is in gold once the dollar returns to
the Gold Standard.

We are not anywhere near those TRUE
Valuations…again, this is only a “talk it down” game by the
Bernank….and he is a master of talking things down or up everytime his
lips move….between him and CNBS, all they ever have to do is say
something that scares markets….no one ever actually does anything any
more…it’s all come down to innuendo!

BUT DON’T BE SWAYED BY
SHORT-TERM manipulations….on the other hand, if one is only trading
some PM stocks, then wise to grab some profits when possible….that’s
one reason I instantly sold HL earlier today once I heard the Bernank’s
comments.

Actually, Gold’s price has already rallied back $30 from its low of the evening! Ahhhh, you gotta love them computers!

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bear market, bear trap, bonds, currencies, dollar, Early Warning, european banks, flash crash, gold, investment strategies, smart money, state finances, the Congress, treasuries, US dollar, US Treasury

The Danger of Staying in Cash

bear market, bear trap, bonds, currencies, dollar, Early Warning, european banks, flash crash, gold, investment strategies, smart money, state finances, the Congress, treasuries, US dollar, US Treasury Leave a comment
This might be news for some of you? Cash sweep accounts are NOT protected in broker security accounts.

And for those who don’t know, cash sweep accounts are money market funds.

However, there are different kinds of money market funds…only those money market funds invested through BANKS are FDIC protected.

But Money Markets with brokerage accounts are NOT protected by FDIC.

Money Markets are protected by SPIC insurance, but that only matters should your broker go belly up….

If the money markets should lose value (called “breaking the buck” because most MMs are priced at $1.00 per share, exactly), it is highly unlikely your stock broker will take the blame since MMs are invested in short term debt paper such as 30 day treasuries, and 90 day commercial paper sold by banks and large companies for short term borrowing needs.

I think the average trader believes that their CASH account sits on a bunch of dollar bills in a vault somewhere? That illusion is not true…

Instead, your CASH accounts (called sweep accounts because every time a trader sells a stock, the proceeds are “swept” into a “cash” account) are invested in 30 day to 90 day paper sold by sovereign nations, banks, and large corporations.

If Greece were to default, or any other PIIG nation, then that event could cause investors to stop buying commercial paper sold by European banks because of fear of bank bankruptcies…this in turn could cause sweep accounts to become illiquid and/or worth less than $1 per share.

Also, should the US have a technical default on its treasuries on or around August 2, that would cause buyers to hesitate to buy or trade treasuries, except at greatly slashed prices causing a discernible drop in value of those assets (debts), and stinging many cash sweep accounts. Now, I know that most Americans believe that Congress will come to its senses and raise the debt ceiling limit, but I have my doubts. Time is short, and I believe the two parties are far apart in ideology, and as the TARP vote in 2008 demonstrated, there are many in Congress who do not understand how the complex world of finance really works. 

The main point here is that many traders think of their cash sweep accounts as the “safest” places to park their money, even despite the low interest rates…

Well, “surprise, surprise!” Maybe that notion is about to be turned on its head?

So, where should one park their money if they are risk-averse in this market correction?

Well, the strategy I am using is to park my sizable cash sweep money (money otherwise not intended to be invested in stocks at this time) into currency ETFs. The ones I favor currently are FXF (Swiss Franc) and FXA (Australian Dollar)…

XRU (The Russian Ruble) looks a bit attractive too, but keep in mind that can be a more volatile, less stable currency because of political concerns…and yet, even the Ruble looks much more stable to me than does the US $ or Euro.

Also, consider some sweep money in gold/ silver…now, currently, gold and silver are in a de-leveraging selloff, so go lightly here for now. But the one that continues to stand out as a safe investment to me is the Central Fund of Canada (Amex symbol: CEF) which is invested directly into gold and silver bullion held under safe lock and key in a Toronto bank vault.

Now, keep in mind that when the smoke clears (which may not be for a long while?), you would have to wait 3 business days for funds to settle before you could use the proceeds from one of these ETFs for a stock investment…but the idea here is to preserve your cash for another day…what good is convenience with a cash sweep acccount if the money markets it invests in “break the buck” and lose value or become illiquid and difficult to cash out?

Now, what if my concerns are totally overblown and way off base, as I suspect some of you may believe? Well, at worse, you will probably make money any way on investing in these ETFs….or at least, you won’t lose much if I’m wrong, as the FXF and FXA move rather slowly compared to stock trades…and CEF is generally a very stable traded gold ETF.

Well, you have the plan from ACE…where else are you getting this type of strategy?

Good luck…now that you know my concerns about the very fragile economic situation…and what I think is the best flight safety plan! Don’t follow the crowd on this safety trade, people…you could get badly burned.
ACE

Please visit ACE’s message forum where active traders discuss their trades on stocks and options...it’s free! You might find your next great trade idea there!
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bush tax cuts, conspiracy, flash crash, Obama, the Congress

Conspiracy Among Big Traders?

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The story appears in the Striking Price column at Barron’s…it’s a conspiracy theory, and what it is in a nutshell is that some BIG institutional traders and BIG investors are trying to pressure the markets into another Flash Crash or Meltdown as we head into the spooky September/October period in which stocks usually crumble.

The reason for the conspiracy (and my interpretation of it is) by these big traders is that they want to scare the public into thinking that the world is falling apart…this in turn, will make the general populace vote against the Democrats in the November elections.

Further conjecture would lead one to conclude that once the public votes out the Dems in Congress, then Obama will lose his mandate. The new Congress will then vote to extend the Bush tax cuts into year 2011 (they were due to expire end of this year)…with Washington then in gridlock for next year and the tax cuts extended, the theory goes that the BIG players will move their money back into stocks by November…and a major stock rally will ensue in late 2010 and into 2011…as the stock market loves when Washington is in gridlock! …and when Obama is held in check from instituting his new socialist programs.

I don’t know how true this conspiracy theory is…but I find it interesting that this theory is circulating among the professional traders in the options exchanges!  However, as one long-time investor pointed out to me, there would be a lame-duck Congress between teh elections and early January, and one would have to assume the Lame Ducks would press hard to push through as much legislation as possible to please the Democrats and the President. He makes a good point! The link is below:

http://online.barrons.com/article/SB50001424052970204304404575449361249400820.html?mod=BOL_hpp_dc“

 

ACE